Liberty: It’s an economic issue

 

In light of recent events, one key question that has been flying about is where we fit into this new and radically changed political climate. Corbyn’s Labour may adopt more liberal policies on social issues such as mental health or LGBT rights, which whilst welcome gives us fewer unique campaigning avenues. Amongst all this, the economy is a key divider, and how we frame our policies may be crucial to our electoral revival or lack thereof.

Building a new liberal economics, distinct from Conservative or Labour strategies, is possible, and we need to do it by the simplest of methods – applying our own passion for personal liberty in the economic sphere. That means ensuring that neither corporate wealth, private wealth, nor the state are able to dominate people’s economic lives, and trying to make the position of ordinary individuals more economically powerful. That means a push to spread wealth and income more evenly without direct state control, by targeting ownership as a source of economic power.

Ownership models where the state is in charge (outside areas of natural monopoly where the state is the only effective provider) risk turning economies into political pawns; on the other hand, current ownership models where a tiny elite hold vast economic power cause deep and entrenched barriers to the prospects and liberty of a workforce living as their economic dependents. Neither is adequate, acceptable, or liberal.

The policy focus of this should be restructuring how businesses are constituted, focussing on cooperatives and social enterprises. Cooperatives have the advantage that more workers have the liberty to enjoy directly the fruits of their collective profits, rather than seeing them siphoned off – this is an excellent liberal approach for larger business, incentivising profit and efficiency and injecting income deep into the base of the economy. Social enterprise has other benefits, directing the power of markets into measures that support collective but independent resources or improve the freedoms of others. Both should become norms, and shareholder ownership the exception, in a liberal economic world.

SMEs and the self-employed are the third strand in business organisation that we need to support relentlessly. People’s freedom to direct their own labour in this way is fundamentally a liberal cause, and moreover SMEs are a sector where we need to win electorally. We can push the Tories hard on this, especially in rural areas.

All this, in turn, will require the creation of non-profit investment societies, where we can have professionals rather than politicians making sound investment decisions but with a view to building business and productivity not personal fortunes. This can be a first answer to the spectre of “investor flight” – starting the slow process of making investment a sector developed to support the economy rather than the elite is a necessity.

We as a society should be pro-business – and a key part of that should be ensuring the greater economic fairness and public benefit that comes from business being pro-society. Liberals can lead the way in developing a synthesis that recognises both the limitations and the uses of market mechanisms, and harnessing that force to help with economically boosting the power of ordinary individuals in our country. Liberty is our goal; and just as much as in the social sphere, our economic policy should be founded upon it.

* James Baillie joined the party in 2015 and is a postgraduate historian at the University of Birmingham, originally hailing from East Anglia

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12 Comments

  • Samuel Griffiths 28th Sep '15 - 9:17am

    What a wonderful read for my morning coffee. I couldn’t agree with you more, James. I have long thought of liberal economics in those terms, with an understanding that neither state ownership nor elite-centric monopolies could bring about positive results. The question I would put to you however is how you intend to tackle the present climate? After all, community focused economics is terrible for big business.

  • Stephen Howse 28th Sep '15 - 9:28am

    A good read, and it’s great to read such strong support for cooperatives on LDV.

    My question to the author would be: How do you think we, a small island nation of sixty million, can begin to build this new liberal economy in a globalised world?

  • Mick Taylor 28th Sep '15 - 9:32am

    I agree with your comment on natural monopolies. The problem is that the party has got itself into a hole about the obvious natural monopolies – power, rail and water – a won’t even consider some form of state ownership or direction, with the result that monopoly private businesses – including foreign state owned industries – are making huge profits based on excessive prices that affect everyone, but especially the poor.
    What do you think the role of the state should be in respect to these industries?
    I agree with your ideas for liberal economics.

  • One thing that happens overseas that doesn’t happen in the UK, is that state-owned businesses are private companies with the state as a majority shareholder. They are run as private corporations, and the state benefits from dividends as well as tax revenue. Other than that government largely keeps out of the way.

  • Neil Sandison 28th Sep '15 - 11:16am

    Samuel Griffiths .We start from the bottom up .It is time for Liberal Democrats not only to promote community politics but also community economics .There are plenty of vacant retail units in our market towns, local village shopping parades and out of town new housing developments being ignored by the brand names who have collectively decided to abandon those locations in favour of look a like shopping malls in our cities and retail parks.
    This presents an opportunity linked to the Localism act .to encourage new or shared start ups be they co-operatives ,social or community enterprises .But we have to discourage overly high rental charges through the business rate regime through either an addition charge on business rates for units vacant for more than 12 months or a discount if the premises are shared by two or more enterprises certainly in the first 3 years of trading.

  • Yes, yes, yes, but.

    I’m not sure this is enough to be a different narrative. Labour and the Conservatives are also quite happy to ‘encourage’ co-operatives. Encouragement is a good policy but not an earth-shattering one.

    Ultimately, the reason we don’t have more co-operatives is not for lack of encouragement, but because we are where we are with regard to who owns what. We might observe that Starbucks would be better if owned by its workers – and I hope we would be correct – but it isn’t. Well, I suppose the franchise model is a kind of co-ownership, but I don’t see any half-hearted cheering.

    And where there is adequate competition, the “tiny elite” don’t wield much power – because we then have the power to work or shop somewhere else. So boosting competition is liberating even if we don’t get co-operatives and social enterprises.

  • Andrew McCaig 28th Sep '15 - 2:13pm

    Joe,

    “Boosting competition” in any realistic sense generally means more interference from the State, not less. Otherwise you just get the “competition” between coca-cola and pepsi-cola as to who can sell the most of a damaging product to our children…

    I would want to level the playing field by stopping the free market competition shown by Big Business towards small business – putting the small people out of business e.g. by lowering key prices, by negotiating huge “economies of scale” price advantages from suppliers (milk being a classic example), and manipulating the global tax system to reduce “costs” that should actually be going to us….

    What we need are economic models that measure the real costs and benefits of enterprise. If co-operative businesses cost the NHS less because of a reduction in mental health problems, or promote a better work-life balance and therefore better socialised children (both of which are random guesses on my part, before people start arguing about it!), then that should be quantified and reflected in some tangible advantage to the companies concerned. What we see instead is a Tory government that is putting hundreds of small businesses in the green energy sector out of business by removing subsidies they thought they could rely on, while committing billions and billions to nuclear technology the financial benefit of which will go to the French and Chinese while the risks are taken by the British taxpayer.

  • Yes liberty is an economic issue, but you, James Baillie have confused it with the idea that it is about the organisation of one side of the economic divide. I assume when you talk about co-operatives you mean worker co-operatives and not consumer ones. If you encourage individuals to set up in business they will want to expand and employ people and grow and grow. Now there is nothing wrong with this but it doesn’t lead to a society where everyone has his own business.

    However you do have a couple ideas that needs exploring – dealing with the spectre of investor flight is one of them. Maybe allowing the building society model to be used for business investment might be a way to create your investment societies. However I am sure those working in banks believe they are professionals. The problem is that the banks are not good at investing in business. Can governments force them? Should the government run its own investment bank with the remit to invest in business? (Maybe a liberal solution.)

    The other idea of yours is making shareholder ownership the exception. I suppose a first step would be to ban pension funds from owning shares, then all financial institutions and also taxing heavily dividends and the inheriting of shares or forcing shares to be sold to the government on death. None of these appear to be very liberal.

    However people only have liberty when they have economic resources, well paid employment and a home to live in. Increasing liberty has to include dealing with these shortages and you haven’t mentioned them.

  • James Baillie 29th Sep '15 - 11:27am

    OK, a few very quick responses:
    – Samuel/Stephen: I think investment is the key here, particularly my thoughts on moving that more into non profit (and/or perhaps mass ownership) and non state areas. Partly one has to face globalisation with some localism – creating some “closed loops” that avoid money being drawn up and out into the floating global market system – but I think there may be more innovative and clever things we can do, such as looking into whether/how cooperatives could become more globalised.
    – Mick: I do agree & am sceptical that one can really have a true competitive market in utilities, rail, etc – we should at the very least allow the state to compete for contracts. There are options open to us other than nationalisation and privatisation that might also be worth considering, for example non-profit corporations with a government mandate (like Channel 4 currently is).
    – Joe: Competition is fine, but it’s not the be all and end all. The idea that it’s a perfect choice mechanism is woolly, unrealistic economics – businesses aren’t actually competing to produce the best product for the lowest price, and consumers certainly aren’t in a state of perfect information when making those decisions. Liberty via economics has to mean boosting wealth at the lower ends of the economic scale, not just people’s ability to benefit from markets reducing prices which is always somewhat limited.
    – Michael: Wrt shareholder ownership, you’re putting words into my mouth – one can discourage, for example, pension funds owning shares, or give them alternative options, without banning it. I think we should tax the inheritance of stocks & shares in particular more heavily, there’s no sentimental argument against it and as far as rights go I think the liberal tradition has strongly tended to favour people’s right to stand on their own two feet economically (which is the whole point of allowing them to share in the profits of their business) as opposed to people’s “right” to inherit (in this case economic) privilege, which I’m honestly not so keen on myself.

  • Thank you, James Baillie for commenting on the comments.

    I don’t know what words you think I am putting in your mouth. I was suggesting one way to reduce share ownership was to ban it for certain organisations. I didn’t say you had suggested it. When you talk about encouraging I assume you mean by different tax rates on dividends from companies to your “alternative options”.

    However I notice you didn’t address my concern that you are only dealing with the ownership side of the economy. Of course you might really want a more radical solution but didn’t want to say – force all organisations to give their workers shares in the organisation they work for. And so abolish the non-share owner, by making everyone as soon as they start work a share owner. But I don’t think that is your position.

    You want to encourage someone to start their own business but when they die you don’t want them to pass it on to their children (which is a motivation for some people).

  • James Baillie 30th Sep '15 - 12:13am

    I think in terms of starting one’s own business I’d be very amenable to, say, children wanting to carry on running an SME, but when a business gets big then passing the whole or most of it on is an effective transfer of considerable power that I’m not sure we as liberals should support. Of course passing things on is a motivation, and I think we should make some level of allowance for that, but only so much.

    You’re right that I’m only dealing with ownership but that’s my intention here – some other aspects of the economy, for example tax rates and wage rates, I’d also like to deal with but given the 500 word limit on LDV there’s only so much that can be fitted in! Watch this space – I’ll try and write something on those in the next few weeks and months if I get the chance.

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