We need a new economic philosophy, one where people come together for the benefit of all members of society – Scotsman article from today
IF YOU have one uncontested political philosophy and it fails, what do you do? Get another. That’s what the idea of Common Weal is about. Since the work of Adam Smith was selectively reinterpreted in the 1970s, almost all political parties came round to a single belief that the best outcomes for all stem from “perfect competition”. The idea is simple: the outcome of a fair competition is always the best possible outcome and we have nothing to learn from the loser.
This idea that perpetual conflict on a battlefield free of obstructions is the ultimate means of filtering out anything that isn’t excellent underpins the British approach to everything. In the economy, we call this the free market. In education, we call it meritocracy. In first-past-the-post elections, we call it a majority. In the public services, it is called consumer choice. In the playground, we used to call it “winner takes all”.
This assumes that competition can be perfect, that victory is a sign of inherent merit and not the ability to play the game; that complexity can be measured through simplistic competitions, that there are two classes of people – leaders and followers – defined by how much money they have.
This is almost exactly what Adam Smith warned against. There is no such thing as perfect competition, especially when you let the victors define the rules of the game. In contemporary British capitalism, markets have become little more than mechanisms for the immensely powerful to crush competition – legally if they can, or illegally if they can’t.
The best way to win in the modern market is to take as much value out of an economy as you can while putting in as little as possible. It is why our economy is so dominated by high volume, low margin, low skill, low pay, low productivity, low investment industry sectors such as retail. Why make or build anything if you can buy cheap from China and sell it expensively, crushing indigenous industries in your wake?
There is an alternative philosophy to this. It is perhaps best summed up by Norwegian prime minister Jens Stoltenberg, who said “to build more, we must share more”. Instinctively, all of us know this to be true. Modern Britain is like a nursery school in which the teachers thought the best bet was to allow the most aggressive child to hoard all the Lego. Nothing gets built; the goal becomes to get and keep the Lego, not to use it. Share the Lego more equitably and, far from losing productivity, you see a rapid rise in productivity as youngsters build things rather than fight.
This philosophy has bubbled around just under the surface of Scottish politics since devolution. An instinctive understanding that “winner takes all” isn’t going to produce the best outcomes has put a check on the wilder extremes of privatisation, marketisation and deregulation. But this is a constant struggle with the commercial lobbyists.
I believe a big majority of Scots want that alternative – ruthless competition has done nothing but condemn them to low pay and constant insecurity. To which end the Jimmy Reid Foundation sought to give that alternative philosophy a name; Common Weal, containing the meaning both of wealth shared in common and for the common wellbeing. It is an attempt to describe the sort of social and economicmodel of the Nordic countries, but in a distinctively Scottish context.
At the heart of the Common Weal vision is that reform must begin with the deeply-flawed Scottish economy. The dominance of low-skill, low-pay, low-productivity employment is the absolutely predictable outcome of an economic system that places “consumer confidence” and house prices above productivity or balance of trade (never mind human wellbeing) as a measure of success.
Why is this so important? Because almost every other problem we face in society can be traced to an atypical labour market that has a massive over-supply of jobs at the bottom end, massive over-remuneration at the top and far too little in between.
Common Weal seeks to replace the blatant profiteering that passes for enterprise with real enterprise. This means mutual working to pursue a better economy. And that in turn requires 30 years of orthodoxy to be overturned; citizens, through their government, must be allowed a clear say on what economy they want. If they want better jobs, it is not for self-defining markets tell them they can’t have them.
We need to replace the “Tesco economy” based on multinationals draining wealth from the economy with a domestic economy dominated by small and medium-sized enterprises engaged in really productive work such as manufacture, research and development and advanced services. These create wealth not through pillaging the pockets of the people, but by making people wealthy through quality jobs.
That single shift changes everything. People want stronger and more extensive social services, but they are told they must pay higher taxes. This is just myopic UK political dogma. What we certainly need to do is to take a higher proportion of the nation’s GDP in tax, but the first way to do that is to work towards an economy in which a higher proportion ofGDP is paid in wages. The more people are paid, the wealthier they become, the more tax they pay. This is not about high tax versus low tax, it is about high pay versus low pay. Fix employment and, along with proper collection, tax begins to fix itself.
We need a real industrial strategy. Government and its agencies must focus on helping Scottish firms to establish and succeed. Finance must be long term. Potential for fast growth should be dropped as a method of identifying enterprises for support in favour of long-term productivity and quality of employment. Scottish businesses should never have to pay higher rates of tax than their multinational competitors, which get away with paying little or nothing. Defeatism on development levers must be banished; all the assets of the public realm from procurement policy to university research must be marshalled behind indigenous industries that create good jobs and strong exports.
This is not a simple right-wing/left-wing issue – in the Nordic countries, the political Right would no more revert to a low productivity economy than would the Left. This is about admitting failure, learning lessons from those who have done better and moving forward in a co-ordinated way. The foundation is running a big project on this, inclusive and diverse. We’re asking everyone who is interested to submit their own thoughts on what a Common Weal approach would look like in practice – send your own thoughts by going to our website.
We’ve been taking these ideas to lots of meetings and events across Scotland. The response has been uniformly supportive. People are crying out for a new direction. They want well-paid, rewarding jobs, strong public services, social cohesion and economic security for them and their loved ones. The conflict model has singularly failed to deliver what they want; its time has passed. Until politics catches up with the people, disillusion will continue to dominate. The Common Weal is where the people, the politicians, the business sector and our public institutions can come together again.