I thought I would share a piece I have written for the New Statesman ahead of Professor Joseph Stiglitz’s lecture to the All-Party Parliamentary Group on Inclusive Growth.
You can read the piece below:
The shock and awe of Donald Trump’s surge is gruesome viewing for the millions of progressives who admire America. But, let’s be honest. A whipped-up anger at ‘others’ is seeping through Britain, inspiring thousands to join the campaign to exit Europe. Globalisation simply isn’t working for millions of working families. They’re now prepared to vote for almost anything or anyone who’ll turn back the clock and shut up the borders. And that’s why we need new answers. Not to ‘‘fixing immigration’’ but to fixing inequality.
Today, Nobel laureate Joseph Stiglitz will set out for a cross-party group of parliamentarians how rewriting the rules for our economy might help. And for the first time in decades, there’s a chance that business could agree.
Over the last year, Stiglitz’s new analysis of modern inequality has taken shape with impressive force. Back in the ‘90’s, we had a decent plan. Rapidly changing technology meant workers with skills earned more – and those without, earned less. The solution seemed simple. Education, education, education. But, now it’s clear, more study isn’t enough. Ask any graduate struggling in a low paid job without a hope in hell of getting on the housing ladder.
The reality is, as Stiglitz puts it in his seminal Rewriting the Rules, published by the Roosevelt Institute last September, “rules matter and power matters” because right now, our economic institutions reward the wrong people and the wrong behaviour. And that means, the wealth we create simply isn’t fairly shared.
The breakthrough, is that for the first time in decades, the world’s business elite is starting to agree. The World Economic Forum – of Davos fame – now says that the Washington consensus is “incomplete and unbalanced”. Christine Lagarde, head of the International Monetary Fund, talks of a new “gilded age” where “excessive inequality has also become a problem for economic growth and development”. Mark Carney, governor of the Bank of England, says the social contract is now breaking down because, “unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself”.
Larry Fink, chief executive of the world’s biggest asset manager, BlackRock, attacked business leaders last year, for “actions that can deliver immediate returns to shareholders, such as buybacks or dividend increases, while underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth.” He’s got a point. Here in Britain, companies are sitting on around £522bn in cash. Meanwhile, the head of McKinsey, Dominic Barton, has declared, “Boards aren’t working”. Why? Because the business community fell prey in the 1980s to the idea of “shareholder value”, the notion popularised by Milton Friedman that the purpose of business is profit.
This long wave shift in the argument opens a huge new opportunity for a new narrative for reform; not to end the market, but to mend the market. For instance, revised rules for the Bank of England could help encourage pro-growth monetary policy. New rules that encouraged longterm investment might encourage more firms and pension firms to invest bigger in creating good jobs that pay well. A new settlement for science for boost the supply-side push to productivity. Reform of the Office of Budget Responsibility might improve our ideas for closing the ‘tax justice’, creating new resources for public investment. New rules of corporate governance would let us put people with a longer term perspective onto company boards – like workers. New rules for social security would allow retraining for people who have paid in – but face their old career vanishing into industrial history.
You get the idea.
Today, people know in their gut, that there’s something very wrong about an economy – like ours – which is creating 50 per cent more billionaires than before the crash, and increasing the number of children living in poverty by 300,000. But unless reformers across the worlds of business and politics find their voice and start shouting a little louder about what good change looks like, then voters are going to press the reset button. And that won’t look pretty.
This article was originally published in the New Statesman here.