Friday, June 7, 2013

Challenging capitalism in the UK and Wales – Len Arthur

Discussion: Challenging capitalism in the UK and Wales – Len Arthur

Ed Miliband, in a recent speech in the Google Big Tent, argued that it was now more relevant to talk about ‘responsible capitalism’ as opposed to replacing capitalism with socialism. As pointed out in a commentary in the New Statesman, Miliband’s speech refers back to the importance of Tony Blair’s change to Clause 4, effectively re-burying the idea of socialism as distinctive system of democratic ownership and control. Here is the core statement:

‘A choice between an “irresponsible capitalism” which sees huge gaps between the richest and the poorest, power concentrated in a few hands, and people are just in it for the fast buck whatever the consequences.

And a “responsible capitalism”, and this is an agenda being led by business, where companies pursues profit but we also have an equal society, power is in the hands of the many and where we recognise our responsibilities to each other.

And my case is a “responsible capitalism” isn’t only fairer but we’re more likely to succeed as a country with it.’

He uses this position to distance himself from the idea held by his father that a ‘fairer society can be achieved through public ownership’.

This is not even an argument for a mixed economy. There is nothing here about re-nationalisation of basic utilities like water, let alone keeping the likes of Lloyds and RBS in public ownership. Where the agenda of ‘‘responsible capitalism” is ‘being led by business’ beats me. He quotes examples like John Lewis, but they are not leading the trend.

Ed Miliband completely ignores the problem of international corporate power and how to challenge it. Market de-regulation and privatisation of state assets is a key agenda for these corporations to prop up their rate of profit. Maurice Punch argued in his excellent book Dirty Business15 years ago that these corporations had become crimogenic, chief executives operating beyond the control of their shareholders, achieving profitability by ignoring the law of the states they operate in. The current revelations about tax avoidance and money laundering show that these tendencies are alive and well. In a recent edition of Private Eye a special report reveals how global capital is using the UK’s lax company controls to systematically launder money. What is frightening is the use of UK Limited Liability Partnerships (LLPs) as the vehicle of choice: a legal construct introduced by New Labour.

These corporations are becoming more powerful, not less. The only trend they are leading is toward crimogenic capitalism; the end result of neo-liberalism is a convergence of mafia capitalism from the east and the west. 

If UK Labour is trying to avoid the challenge of capitalism, can we do anything about it in Wales? Two recent reports have begun to put this question back on the agenda. One is called Towards a Welsh Industrial Strategy is by James Meadway from the New Economics Foundation and has been commissioned by the Wales TUC, the other is a Plaid Cymru publication called Plan C . It is useful to consider these reports alongside the Welsh Government’s current economic strategy, Programme for Growth .

As socialists, what criteria should we use to assess these reports and policies? Early posts in this blog tried to make overall sense of the left economic arguments (see, in particular, ‘Is Marx now right?’) Michael Roberts’ blog has been compelling from a falling rate of profit perspective. Engaging with both neo-liberal economists and radical Keynesians on their own terms, Ha-Joon Chang’s 23 Things they don’t tell you about capitalism and Richard Murphy’s the Courageous State are superb.  Now, the message for us socialists that seem to come from this lot is the need to return to the idea of a political economy, where we overcome the separation of the social from the economic, in order to serve the needs of the planet and all the population, not just profit. Ha-Joon Chang makes this point, in talking about the market, where he describes the ‘free market’ as a political construct, which can be used to serve narrow or wider social interests. For us in Wales, then, these arguments provide us with the basis for changing the narrative, away from private business growth, together with the domination of the market, toward asking questions about how the wealth and value we create can best serve the population and the planet.

The three documents place the Welsh economy within the current troubled capitalist context. The NEF report provides the most comprehensive analysis of the context, locating the crisis in the shift of income from salaries to profits – with the expansion of credit filling the gap – and the deregulation of banking and finance. In relation to Wales, the report provides an interesting analysis of our contribution to the UK balance of payments, suggesting that it is positive, due to our manufacturing, but that we then have to pay the cost of the collapse in services, due to the financial crisis located in the south east. After making reference to the context of crisis, they go on to recommend steps that could be taken to try to protect Wales.
All three approaches include similar recommendations in relation to infrastructure spending on transport; the importance of training and skills; the need to guide investment toward renewables; the importance of the local economy; and the important role that cooperatives, mutuals and social enterprise can play. Funding is, of course, a problem. Plaid supports the first Silk report and NEF suggest the Welsh Government should have borrowing powers. Both talk about raising money locally and borrowing. The Plaid report suggests an arm’s length Business Bank for Wales, borrowing from the private financial markets. What is missing from all three is how the issue of ownership and control is related to growth that is – in all senses – sustainable.

First, the positive role of the public sector is mentioned only with regard to the use of procurement to help Welsh industry and services. With around one-third of the jobs in Wales directly dependent on the public sector, together with those indirectly dependent and with wider definitions, the real figure is possibly above 50%. This is a sector of the economy which is about re-distribution, providing public services, under public control, and is democratically accountable. The public sector is not only the major part of the Welsh economy; it is using the resources available for public benefit: need, not profit. As socialists we should cherish, protect and project the role that the public sector plays in our society and economy. For us, this is one key ‘sector’ that could – if we think beyond procurement to the provision of high quality housing for all – be the foundation of an alternative and challenging socialist political economy.

Second, cooperatives feature almost as an add-on in all three documents, with a confusion of language and possible role. The Welsh Government has established a Commission to evaluate cooperatives in Wales, reporting in the autumn. I have argued elsewhere that it is important that we, as socialists, clearly support cooperatives as a method of collective ownership and control, not confusing them with other forms of social enterprise. The International Cooperative Alliance definition provides for member controlled organisations with each member having one vote. It is important to understand this, as the model referred to both by the NEF and Plaid documents, Glas Cymru, is not a cooperative. The board appoints itself and, after recommendations from an independent committee, appoints the 50 or so members – a self perpetuating oligarchy. It should become a real cooperative, with all who pay water rates to it becoming members who then elect the board.

The ‘add on’ reference to cooperatives indicates a lack of coherence about why they should be an important form of organisation in the Welsh economy. Basically, cooperatives help to anchor capital through collective ownership, which can be bolstered by legal arrangements. It means that the value created remains geographically located and less vulnerable to capital flight. Worker and consumer cooperatives also have a track record of lasting longer than comparable privately-owned businesses, largely due to the collective involvement and commitment of members. As an organisational form, they are very flexible across all sectors and are particularly useful as start-ups and when private organisations face issues of succession. A key to a socialist cooperative strategy would be to help organisations that have been privatised back into collective ownership and to democratise the provision of public services whilst remaining in the public sector. Finally, they are a form widely used to help ‘localise’ the economy, such as through utility consumer cooperatives which not only help to stop local economic leaks, but also can provide finance for locally owned provision of renewable energy, such as wind power.

Third, the NEF and Welsh Government documents stress the importance of government support for particular economic sectors. This has been derided as ‘picking winners’ but, as Ha-Joon Chang argues, it can be central to the economic development of the whole economy. Auto and aero engineering are already recognised as key sectors of our economy but others less so, such as food processing, which accounts for around 35% of Welsh manufacturing and, as referred to above, the public sector. Moreover, cooperatives as ‘knowledge cooperatives’ can provide a collectively-owned link within sectors between producers and innovators (such as in universities) enabling the establishment of knowledge intensive business services (KIBS). These can then compete internationally, through establishing and maintaining a niche position in ongoing world leading innovation. There are already examples in Wales, holding more promise than the current Enterprise Zone strategy.

Fourth, as the NEF report points out, we cannot rely on inward direct investment: we have to find ways of generating the resources ourselves. Clearly, the Silk Commission’s first report, which is embraced by Plaid, can help – but only if we have a socialist trajectory. Let us be clear: devolved powers over some tax and borrowing rights will result in pressure to reduce tax as well as to oppose borrowing; the debate will sharpen, not go away. Private borrowing is also referred to – Glas Cymru has about £2,700m tied up in private bonds against the income-stream of our water rates. The Solidarity Funds in Quebec in Canada currently stand at around $8.5bn and have been built up largely through small savings from trade union members. We could establish a similar investment fund in Wales, using the cooperative and building society laws, so that those that investing were also members and the Welsh Government could use any new financial powers to provide initial support and help offset risk.

Fifth, as socialists we should embrace the idea of wealth being used for social purposes and not profit. In Wales, we should aim to go beyond the simple measure of GDP and supplement it with equally important social aims, such as providing work, housing, raising household real incomes, reducing the carbon footprint, expanding ownership and control and re-introducing trade union rights at work – thus, making a point of a trajectory toward socialist political challenge to the UK and beyond by example, and reaching out internationally. This represents a strategy of transitional actions and demands in operation. We could, in Wales, become as inspiring as the Mondragon network of co-operatives in the Basque Country, just by using a slightly amended devolution settlement – it is more about political will than constitutional powers. In this way, we could provide a real challenge by developing a trajectory toward democratic socialism, being an alternative in reality to crimogenic capitalism, not a weak form of co-existence that relies on appealing to capitalist businesses to be more responsible.

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