...a blog by Richard Flowers

Friday, September 18, 2015

Day 5371: Where we go from here: What's The Economics For?


Tory: "The Rich will solve all your problems; give tax cuts to the Rich."
Labour: "The State will solve all your problems; take taxes for the State."
Liberal: "People are the only people who can solve our problems; how do we help everyone?"

It is more urgent than ever that the Liberal Democrats put forward an economic platform that will actually liberate people from poverty, as opposed to the Tory position of exacerbating the advantage those with capital have over those without AND Labour's fantasy economic policy of printing and spending money to solve every problem under the sun.

could be UK economy ;)

This platform should build on the Coalition policy of shifting tax from the poor to the rich and from income to wealth.

I've said before that we should be taxing WEALTH (money that is buried in vaults and assets doing nothing) rather than INCOME (money that is doing work generating employment and business).

Nothing makes it more apparent that the Tories have switched direction without the guidance of Nick and Danny and Vince than Gideon's post-election tearing up of the Coalition policies that were effecting greater equality. Shifting tax-cutting to the wealthy (through his long-desired Inheritance Tax cut) and the better off (by raising instead of lowering the 40% threshold and so passing the bulk of the benefit of the rise in personal allowance up to the already earning mores).

So in the short term we can plug away at pointing out how the Coalition reduced inequality, invested in education and created opportunity and that the Tories have turned their back on all of that.

But to answer the question "What are the Liberal Democrats for?" we are going to need a bigger, bolder plan.

There are TWO BIG questions to ask ourselves:

What do we want our economy to do – what should we make, grow, tend and sell – and how should our economy work?

What do we do?

Three quarters of the British economy is in the service sector and a very large part of that is in financial services.

This is both a strength and, as the crash of 2008 taught, a vulnerability. To address that, we need both to reform our financial services and to broaden our economy out to be less reliant upon them.

I don't want to indulge in the "banker bashing" that is common from a Labour Party keen to absolve, or at least deflect, from their own complicity. Simply smashing up the existing banks, or driving them away with ever-higher costs of doing business, would still, even after the crash, be killing a goose that lays quite a few of our golden eggs.

But with Master Gideon flogging off the Royal Bank that we Own of Scotland at knock down prices to his city mates, we are fast losing the golden opportunity we had to make the changes needed: to complete the sensible reforms of the banking sector that Vince Cable set in motion, and encouraging a greater DIVERSITY of banking, growing local banks that will better serve the needs of millions of people who are working in small enterprises.

Our banking sector is completely out of scale with the needs of most of our people. We need banks that are SMALLER and more LOCAL so that they are responsive to the vast majority of people and businesses in Britain which are SMALL businesses. We need to look at recreating the local bank, with the bank manager who knows and cares about their customers. Banks that are small enough that the government CAN afford to step in and save them if they fail.

Outside of finance there are three main areas for growth that we already know of.

The first of these is housing, in fact construction generally. The Chancellor has founded his reputation and the recovery on the shifting sands of a house price bubble. That's not good. Far too few houses are being built, and the ones that ARE being built, for example all over London, are not affordable homes for families, but investment opportunities for the new Chinese millionaires and Russian oligarchs. Instead of boxes in the sky we should be building homes and communities. The lack of decent housing (and the schools, shops, hospitals and other infrastructure that goes with building a proper town) lies at the heart of the unrest and frankly shaming attitude towards immigration. The economy will benefit from immigration, but we need to be directing that benefit to the people impacted by pressure on home and wage.

Secondly, there is energy. The Tory government in the pocket of Big Carbon and Big Nuclear has almost literally burned the flourishing Green Revolution that the Lib Dem energy secretaries Chris Huhne and Ed Davey so carefully and successfully nurtured. It really is cutting off your nose to spite your face. Gideon appears to be staking everything on tearing up the Home Counties in search of fracked gas. Adding more CO2 emissions cannot be the answer, investing further into burning stuff that we soon end up needing to import cannot be the answer, particularly when we have the opportunity to harness wind and wave, tide and thermal to become a net energy exporter.

Thirdly, there is the creative arts sector. Again, the Tories actions appear utterly counter to good husbandry of this important and growing sector, putting a petty vendetta against the BBC ahead of its vital place in nurturing talent in writing, acting, directing, design, music and many other forms of performance and support. Handing out tax breaks to Star Wars with one hand while snatching a sixth of the BBC's budget with the other is beyond muddled and into schizoid.

The so-called culture secretary has recently spoken of the BBC damaging the commercial value of news. This is so FUNDAMENTALLY wrong it is hard to grasp. The entire free market economy DEPENDS on free and equal access to information. If news has a COMMERCIAL value, then people are PAYING to get an INSIDE edge on people who DON'T have that information. In a previous generation TORIES actually legislated to make that ILLEGAL. So this current idiot doesn't even understand his OWN dogma.

Providing news freely and fairly is a PRIMARY PURPOSE of the BBC, and indeed no state can properly define itself as a Liberal Economy WITHOUT a BBC-equivalent making sure that all the people have the same opportunity of information.

I'd add something else. While our military is overstretched and our military adventurism has done nothing but make itself despised across the world, what saving grace does the UK still possess in international influence?

Soft power. Study after study after study says so.

The one area where we still lead the world, the one thing where we can make more of a difference than anyone else, the one real good we ca do in promoting our values, is 'soft power'. Cultural influence. Persuasion by ethos. And our leader in that is the BBC.

This Tory government won by appeals to narrow nationalism and economic competence. The BBC boosts both our national power and our economy.

The Mail is based in Bermuda to avoid British tax; the Telegraph in Sark for the same reason; News International makes its tax affairs even more murky, and Mr Murdoch changes his nationality according to what flag of convenience he needs. Why does Mr Cameron take his lessons in nationalism from this bunch of tax exiles and foreign billionaires? Why does he take his lessons in morality from phone hackers and ex cons?

The Prime Minister boasts of wanting to take the fight to ISIL, meaning he wants to spend more money and lives that he won’t pay but we can't afford on yet more foreign adventures. Because that's what Prime Ministers always do. But he won't spend far less money and waste no lives by supporting the BBC in doing something we're actually effective at.

This is spitefully cutting noses off both his faces.

(The BBC, by the way, treat the Liberal Democrats in a totally shoddy way, consistently underrepresenting us in political discussion. So it's in no way in our political interest to defend them. But it's the right thing to do, so we should do it anyway.)

How do we do?

Our current model of the economy requires most people to work most of their lives.

Our politicians, of Right AND Left, even make it a virtue to be enslaved to labour – "Hardworking families" are worthy of merit; we all know the jibes at the "other" sorts of families, whether from Tory or Labour front benches (though, who knows, Mr Corbyn may deliver a change to this rhetoric – I wait to see).

In the not-too-distant future this will simply not be viable.

While it may be a little early to panic that "the robots are coming" in the medium term – which we need to be thinking about – there will be many areas of the economy where those whose capital controls the means of production will become able to replace human labour with robots and computers.

Self-driving cars are the next major technological innovation on the horizon. Self-driving cars means self-driving taxis and self-driving lorries. And that's jobs just gone. Robots will work longer hours and deliver safer and in more timely fashion, and won't stop for food or a fag or a toilet stop or for dogging. Of course you won't be able to hold them responsible for refugees clinging to the underside of the truck either – maybe there'll be more jobs in security [unhappyface].

[Arrest the programmers! Or arm the robots! Tell them to target all illegal passengers! That couldn't possibly go wrong… ]

An economy of robots may be able to generate a higher level of GDP (though who would buy all their robotic output becomes a problem) but if we stick to the current model with more and more people locked out of employment, then the levels of inequality will make today's divide between rich and poor look like a socialist utopia.

Now, the Conservative might not see anything wrong with that. And based on past performance, Labour would be quite happy to recruit a client state of people trapped on benefits and tax credits beholden to the government on sufferance of good behaviour. But Liberal Democrats believe in ensuring that no one is enslaved by ignorance, poverty or conformity.

So we are going to need an economy that shares out the GDP in a greatly different way to the current one.

To start with, we need to be looking at the way that the limited company works. As a tool, it's had incredible success, but it remains a form of organisation designed in the Nineteenth Century and places power almost entirely in the hands of directors who have little accountability to even their shareholders let alone their workforce.

Our working lives ought to be so much more about who we work with rather than who we work for. So we need to be looking at organising small enterprises (at least initially) in more collective/shared ownership/(yes, John Lewis) ways.

And I've also made no secret that I would like us to look again at a Citizens' Income.

Experiments have shown that simply giving money to people is a stimulus to the economy. Certainly they might just spend it, which in itself generates economic activity, but also it will empower people to start their own business, or take the time to write music or their novel.

The keys to increasing GDP are available resources (time, money, skills, health) and confidence.

The current economy is built on job INSECURITY, driving more and more people to work longer and longer hours. We need to find ways to give people back their TIME. And with it, the CONFIDENCE to do their own thing, or to change jobs, or just to walk away from bad jobs.

The Greens pitched the Citizens' Income as a handout. To people who believe in fairness that seems a self-evident good. But those are the very people you DON'T need to sell the idea to. To a lot of people, it sounded like taking money from the workers and giving to people who, well, weren't.

I'd rather rebrand (sorry) it as a British Dividend – an investment in growing the economy of the whole country and a reward for success when we do. Remind people of the parable of the talents. And ask if we all had some of the advantage of the Rich, how much more might we achieve?

I endorse Andrew Hickey's suggestion that Labour's new leadership does open up British politics to genuine gaps between the three leading Parties, and to be genuinely about debating differences again.

That should inspire us to experiment and come up with some genuinely radical ideas.


Mike Taylor said...

"Labour: "The State will solve all your problems; take taxes for the State."
Labour's fantasy economic policy of printing and spending money to solve every problem under the sun."

Wait, wait. Haven't you ascribed two completely different approaches to Labour here? One where money is raised by taxation, the other where it's yanked out of thin air by QE. Which is the one you're objecting to? Or, if it's both, surely you need to address each separately?

(For the record, I would support raising to top rate of tax, which I am privileged enough to pay, to 50%.)

Mike Taylor said...

... I should say that, this aside, I agree with every word you wrote there.

Millennium Dome said...

I haven't ascribed merely described Labour policies, and two of Mr Corbyn's policies are raise more in taxes and print more on top of that.

However, they're not incompatible. Both speak to Corbyn's Labour believin in State control of money, whether by saying your money is their's to take or that all money is their's to create or destroy at whim.

Oh, and 50% was the Miliband/Balls aspiration; John McDonnell wants you to pay a top rate of 70% (or more)

Mike Taylor said...

Oh, I support a top rate of more than 50%. But I don't see the slightest chance of my ever earning enough for the top rates to directly affect me. Being in the 40% rate right now, that is the one that I feel I have some moral authority to ask to have raised.