Much has been said of the ‘global race’ in the last year. It has become a Tory mantra for neo-liberal policies that have been the justification for the broken policies that shattered the world economy in 2008. If we are in a ‘global race’ what is at the finish line? Who are we competing against and what policies can Labour champion to offer a new vision for Britain’s economic future?
An Economy for the ‘1%’
If one asks a conservative, they might say that regulation, idleness and poor education is causing Britain to fall behind in this economic fight for supremacy. However, if one looks at the economic data for the past decade or so, the picture becomes more confused than the Tory narrative; wages have been stagnating in Britain for the best part of a decade, in America for a third of a century and even in Germany wage growth has ceased. Prices have been on the rise caused by the economic growth of the BRIC economies and while the East has gained in prosperity, the West has rested on its laurels. So far, so conventional – we are all in this together, times are tough, and we’re in a ‘global race’ to the top and so on. Except for the crucial point that not everybody’s wages have been stagnating, not everybody is feeling the pinch and we are not all in this together. The best example of this is that 20 years ago in the USA the top 1% counted for 12% of all wealth; not great, but not yet a crisis. Today that figure has rocketed to 23%. Since the rise of Thatcherism and neo-liberal economics the rich have been winning big, while the poor have been pushed further and further into poverty caused by the downwards pressure on wages. This in turn leads to people borrowing more against the value of their mortgages, pushing themselves into more debt and now we have seen the scourge of pay-day loan companies preying on the poor. So what does this have to do with the ‘global race’? Well the Tory method to fix this crisis is to push down wages even more, cut taxes on the rich that pay to educate, care for the poor and to cut regulation for the very people that pushed the world into turmoil.
An Economy for All
The Tory policies of advocating wage cuts and freezes, longer working hours and worse working conditions will lose us the ‘global race’, not win it. We cannot compete with the BRIC nations on wages, or any other Dickensian measure of bad worker treatment. But we are not doomed to fail, we are not doomed to economic servitude and there are other positive measures to reshape our economy for every working man and woman. We need a massive economic structuring away from the Anglo-Saxon model towards a Nordic model – this will entail a dramatic rise in taxation, a revolution in the way our education system is structured and a wholesale change in the way unions work with business. In practice, these measures mean government revenue will have to increase to at least 50%, an increase of around 10%, increasing the top rate of tax to 60% (approximately), more apprentices in the work place, compulsory trade union representation and a senior union member on the board of every major employer. While these policies may seem hard-left, many policies would also be pro-business and anti-red-tape. We must cut regulations for the job creators – we are a nation where 91% of our land is countryside and yet we have a housing crisis, Ed Miliband has made commitments to house building, but an iron commitment is needed. A Keynesian growth scheme most be employed to keep capital flowing throughout the economy – more wealth for the consumer and more business for companies. The whole concept of a minimum wage must be reviewed. If the work force is heavily unionised then a three-way negotiation on wages can be conducted between business, unions and government mediating. The national minimum wage is a relatively flawed concept in such a diverse economy as Britain’s. In this new economy the minimum wage can be broken down into industrial sectors that will properly reflect the needs of industry and the reality of life where a worker in Hull and London have the same minimum wage.
These policies, this whole shift in direction are a risk. But allowing inequality to continue is a far greater risk. Since Thatcher, capitalism has stopped paying its fair side of the deal, it has stopped delivering prosperity for the working classes and the government must take strong action. The real ‘global race’ is not for the highest GDP; it’s for a fair society for all.
Harry Orchard is a Young Fabians member.