Ed: The New Bargain… but the old rules.

September 28, 2011 § Leave a comment

So, this is what Ed Miliband wants Britain’s new consensus to be. A shift to “responsible capitalism” and “good business”. Business permitted to flourish, creating jobs across the country, but with a government wielding sharp sticks (and a few sweet carrots) to keep it working for Britain. Apprenticeships in all major businesses and government contractors; pushing for higher baseline wages; lowering tuition fees; protectionism keeping British workers in their posts; penalties for “asset strippers”. It was a speech designed to put out a new, modernised face of social democracy, bringing business and people together to create the new Britain that everyone wants to be in. Unions would do their bit for workers, but not get involved in grubby street protests. Businesses would negotiate fairly. Surely this is the future… or is it?

How new is the new bargain? And how far does it go?

The new bargain includes some new ideas. It includes some steps in interesting directions, in forcing businesses to do the right thing. However, it has weaknesses, and some of them are fundamental problems with Labour’s assessment of society, economics, and democracy. The new bargain is forcing the system we have into a mould which it will inevitably strain to breach. Apprenticeships will improve social mobility if well handled; they will not and cannot deal with income gaps, and they will certainly not create jobs. Forcing government contractors to host them will cut smaller firms out of the contracting market and concentrate power in the hands of the businesses who have the bulk to keep apprentices. The apprenticeships will flow out, but the money will stay with the heavyweights. Higher baseline wages – again, a measure likely to be put on government contractors – are a good thing, but again starve the smallest businesses of government contracts. Protectionism, too, will mostly affect bigger businesses; small ones are too small to elicit governmental action.

Ed Miliband has been defending himself this morning, attempting to say that his speech was pro-business. He was opposed by the CBI, one former director of which called it a “kick in the teeth.” That is when the fear kicks in for a politician, when they back away from daring to place their foot within ninety feet of the most honourable CBI. Politically, the CBI needs more than a kick in the teeth. It needs its back broken.

What Labour has got wrong is the assumption that beasts the size of FTSE 100 companies are tameable. They are not, and never will be; the rules of the game at present put vast power into the hands of the biggest businesses. Their owners can inflate and deflate house prices in entire areas according to fashions; they can make decisions to give or take away the lifelines of hundreds or thousands of workers on the basis of protecting their own wealth, and can even buy into political power (Lord Ashcroft’s heavily targeted money in campaigning terms was worth one or two percentage points in many Conservative key gains last election according to some analyses, more than enough to change a result and also enough to get him the aformentioned title and parliamentary position). Similarly, because so many jobs are tied up with multinational or national-scale companies, an assumption has been lodged firmly in the minds of many politicians that these companies are “job creators” and supporting them will inevitably mean more people in work and lower unemployment.

A simpler way of looking at it is that businesses have one aim; making money. If that is being achieved on the largest possible scale, and can be achieved on the same scale with one less worker, someone has just lost a job. It’s a simple and obvious idea, but means that businesses are constantly striving to decrease employment, not increase it. Similarly, the idea that big business is very important because it means lower prices. Lower prices for the consumer are indeed possible with great economies of scale – but so is the consequence, lower wages and employment. At best (at least for Britain), the low wages are exported to the Third World. Also, of course, lower prices can also be put in to encourage buying; many people in fact pay over the odds for goods they buy, particularly in fields such as energy consumption and even on supermarket shelves where a dazzling array of meaningless choice (All those different cereals? A large proportion will just have come from the same factory and gone into different boxes) serves to bamboozle rather than inform the consumer. Of course, businesses have no interest in lowering prices in the long run, except that it allows them to undercut smaller suppliers and thus ensure that they (and perhaps a few equally bulky competitors) are able to dominate people’s consumption. The new jobs created when as store opens can wipe out almost as many when a local supply chain is supplanted by a national and multinational one; the only difference being that the latter has increased the huge financial muscle of FTSE businesses in the UK.

To clarify: businesses have a strong vested interest in making as few and as low paid jobs as possible, in eliminating other consumption avenues, and in selling produce for as much as possible. This is, of course, obvious. It is also the fallacy of the new bargain; power will still rest in the hands of the City of London, whilst the wealth gap will still remain thrown open. Democracy will still be under threat from people being able to buy it into submission, and small businesses will remain under the canopy cover of the City that blocks out the sunlight of consumer demand. Big business will be a power which needs to put on a more energetic face for benefiting the public, and which will have to do more of its dirtier work out of sight and mind, but a power all the same. A new bargain will see perhaps a curbing of a few of the businesses most inclined to rock the boat and damage the system, but it’s the same game of centralised power (a weakness in any society) in unelected hands (still worse) and Miliband hasn’t broken the rules.

But never mind the rules. It’s high time to change the game.

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