Incumbents or Entrepreneurs?

The rise of insurgent parties or insurgent leaders in politics has split the political landscape. In business terms we can see this as a battle between incumbents and entrepreneurs.

Established political parties with traditional leaders are the incumbents. They are the equivalent of large, oligopolistic corporations. Slow moving, stuck in the old ways of doing things and fighting for the status quo that favours them. Their success depends on having a broad base of support to which they can play. They favour their base while trying to expand it at the edges to gain their overall majorities. In essence, their business model is one of rent-taking – using their dominant market position as their main advantage.

Insurgents are the entrepreneurs. They imagine a different world. They invent a different way of doing things. They are not bound by the previous rules of engagement. They duck and dive, respond and change their ways quickly. They have a much deeper understanding and are closer to the needs and psychology of a particular customer base. They capture that base, learn and expand from there. They have another particular skill – the ability to first needle and then punch the incumbents in their weakest spots and in a way that makes it difficult for them to react effectively.

UKIP, Trump, Geert Wilders, Marine Le Pen, Podemos, the Five Star Movement. These are all political entrepreneurs. Trump’s was a double success. His entrepreneurial approach first overcame the Republican establishment and then the Democrats.

In this framework, the UK Labour Party has made a monumental strategic mistake – and is bearing the consequences. It should have been acting as an incumbent. Using its dominant market position and building on that. Instead, it decided to abandon the large swathe of moderate, centrist Labour voters without having any idea of how they would be replaced. And, as a party and with its current leader, it does not have the capability to be entrepreneurial. Some of its factions do. Momentum is an entrepreneurial organization. It has mobilised a large group of hard left supporters and energized them. It is imaginative. It does not play by the rules. The trouble lies in the numbers. Momentum and the hard left cannot mobilise enough new voters to make up for the loss of the centre-left.

The SNP was also entrepreneurial – which explains its success. In Scotland it is now an incumbent that has managed to maintain the perception of anti-establishment entrepreneurialism. A bit like Google. How long this position will remain sustainable is uncertain. But probably not for too long. Cracks are starting to appear – both for the SNP and for Google – and they will need to adapt.

This framework poses fundamental questions for the Lib Dems. The party is long established and has an incumbent’s mindset, structure and way of doing things. However, fourth both in the polls and in presence in the House of Commons, the party does not have the market power of an incumbent. Yet neither does it have entrepreneurial capability. In business, this position is a dangerous one to be in. Success from this starting point usually depends on discarding the incumbent mindset and developing an entrepreneurial capability while making sure one continues to benefit from the advantages that previous incumbency has provided – something not available to start-up entrepreneurs. It remains to be seen whether the party can pull that off.

* Joe Zammit-Lucia is a co-founder and trustee of the think tank and a Lib Dem member

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  • Conor McGovern 27th Feb '17 - 5:13pm

    We need to explore the kind of start-up mentality suggested by Norman Lamb two years ago in the leadership contest. Real progressives (from all parties and none) have often been the outsiders but were also capable of speaking to a recognised group in society, with specific wants or needs, in an effective way. We could open up the party more to members, if we wanted. We could build up solid policies but also spell out an over-arching vision and find ways to get round the media by speaking directly to voters and non-voters alike. We could seek out instinctive liberals and grow more ambitious in our policy prospectus. We could work with other parties on common ground, harnessing our place in Parliament for a common cause. If we’re to build or safeguard liberal policies, we need to win bums on seats in the House of Commons but also hearts and minds.

  • Trump is a Republican and about once every eight or so years the Republicans win in American elections. This is not a new Party. Sure, you could argue that he defied the Republican old guard, but the fact remains that he still stood and fought as the leader of the GOP not as the leader of a new political party. In fact a lot of what he says would have been pretty standard before the late 1970s and mostly reflects the death of the End of History free market triumphalism that followed the collapse of the USSR.

    What’s happened in the last few years is the result of fairly recent attempts to alter the roll of nation states. Free movement in it’s present form within the EU only goes back to 2003 and UKIP was formed in more or less direct opposition to EU, both born in 1993. Trump’s rhetoric of protectionism, America first and so on was again fairly normal prior to the mid 1970s and did not really become an unfashionable fringe idea until the 1990s. Bush Snr used to call what is now seen as the orthodoxy voodoo economics.
    The reason Liberals and the Left have been caught on the hop is because that many thought nation states were a thing of the past and that history flows one way. Neither of which propositions is actually true. This is really to do with unpopular policies experiencing a blow back.

  • I think your headline should be

    “Demagogues and the Bemused”

    One appeals to the baser side of us, the others don’t know what to appeal to.

  • Conor, We had done all that you suggest for over forty years, building our party up from nearly nothing to get up to 57 MPs in 2010 when the electoral arithmetic worked out and our leaders had the chance we had worked for. After five years in power, looking ever more like a bunch of Tory poodles while they destroyed us behind our backs, we ended with the desperate electoral slogan of “stability, decency and unity”.

    Now our councillors are having to build again from the ground up.

    At our best we are always entrepreneurial insurgents, so why oh why did so many of our leaders let themselves become the incumbent establishment.

  • Conor McGovern 28th Feb '17 - 1:18am

    David Evans, I agree. We must never, ever again settle for being a small-c conservative party.

  • We had a chance to call for and build alliances to reform the EU into a pro-people institution rather than a pro-business or pro-globalisation institution. We failed. The coalition government was part of our failure to fight neo-liberalism, instead we supported budget cuts, welfare cuts and investment cuts. We need to have an economic policy that puts the people of the UK first well above business interests. The ideas exist, but we are too conservative to embrace them. So yes we could be the “entrepreneurs” with economic and welfare policies to revolutionise the way the country works, so that it doesn’t benefit the rich but it benefits those who are just managing and those who are not managing; that it doesn’t benefit the powerful (or “elites”) but benefits those who feel powerless and those who feel the economy is not working for them.

  • Graham Evans 28th Feb '17 - 9:25am

    @ Michael BG Unfortunately that sounds a bit too like the concept of socialism in one country. Five years ago Hollande put forward a prospective rather on the lines you suggest, and look where he and the socialist party are now in the polls. Marin Schutz of the SPD in Germany is similarly playing the sort of hand you suggest – long on rhetoric but short on details. It has certainly led to a big boost for him and his party, but there is a real danger that he is storing up problems for the future which will lead to real disappointment among his new voters. Liberal Democrats often look to Canada for inspiration and Justin Trudeau certainly inspires enthusiasm and projects an image as a social progressive. However, the Canadian Liberals’ economic policies more closely resemble the Orange Bookers whom so many left leaning Liberal Democrats despise, than the false dichotomy between “business interests” and “the people of the UK” which you put forward. Yes, we need to come up with ways of building a more social market economy, but simply pitting one amorphous group, “business” against another, the JAMs and those who feel powerless, is not the way to do it. We rightly criticise May and the Brexiteers for promoting the idea that the UK can sail confidently forward oblivious of the world around us, but we mustn’t fall in to the same trap just because our ultimate destination, at least as we perceive it, is different to the Tories’.

  • Steve Trevethan 28th Feb '17 - 9:38am

    Thank you for a most thought provoking article.
    Perhaps a long term question mark over all parties except, mostly, the Conservatives, is that of what might be called “deep policies pursuit.” When in direct power, parties act in ways which are noticeably consistent with previous governing parties and noticeably inconsistent with what is promised when out of direct power.
    The big damage to Labour, as exemplified by membership numbers, occurred under Messrs Blair and Brown with their many armed conflicts, favours to banks, increased use of personal debt and the opening up of public services for corporation capture.
    (Notice the similarities to “our?” Party when in coalition?)

  • Lorenzo Cherin 28th Feb '17 - 10:40am

    David Evans

    Do you think , open, tolerant and united, as a catch phrase , is not overused now, just a little better than the previous slogan, does not mean it has to be trotted out in every press release or speech by every single spokesperson !

  • @ Graham Evans

    As a liberal I do not support Communism where all businesses are run by the state. However I do support more worker control and workers getting more of the fruits of their work and less for the owners of capital. I wonder how much of France’s economic problems are caused by their membership of the Euro rather than the government’s economic and social policies.

    In the Trudeau governments first budget they increased the deficit up to nearly C$30bn after promising to spend C$125bn on new infrastructure over 4 years ( The government deficit is just over 10% of government income. The equivalent for the UK would mean government spending being increased by £16bn to £71bn.

    As liberals we are concerned with increasing the liberty of every individual in the country and this makes it important that no one is just about managing or are failing to manage. It is only once a person has no economic worries that they can be truly free (i.e. an hierarchy of needs where the basics are air, water and food, followed by clothing and shelter and then security including financial security). Businesses are not run to benefit the people they are run to benefit their shareholders which are a very small proportion of the population.

  • Graham Evans 28th Feb '17 - 4:46pm

    @ Michael BG “Businesses are not run to benefit the people they are run to benefit their shareholders which are a very small proportion of the population.”. The biggest shareholders in most truly British quoted companies – as opposed to big international companies which just find it convenient to be quoted on the LSE – are institutional shareholders, mainly pension schemes and insurance companies. These are the vehicles through which most people of modest means accumulate wealth, particularly long term wealth for retirement. These people may not be the poorest members of society but contrary to what you suggest they are actually a very large, if not the largest, proportion of the population.

  • Businesses are not run to benefit the people they are run to benefit their shareholders which are a very small proportion of the population

    They benefit their population by benefiting their shareholders. That is how the world works.

    ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest’.

  • @ Dav

    I am sure that those who feel left behind don’t feel that trickle-down economics works well for them.

    @ Graham Evans

    Most people do not pay into private pension schemes – only 8.2 million in 2013 ( This might well be 35% of the population in work but only 19.7% of the working age population and about 12.5% of the total population. Paying into a private pension scheme is not a good way to accumulate wealth especially with the price of annuities.

  • Graham Evans 28th Feb '17 - 7:17pm

    @Michael BG According to the ONS in 2014 there were 10.2 million active members of pension schemes, 9.6 deferred members and 10.6 pensioners. That is roughly 56% of the adult population. This figure will increase steadily with auto-enrolment. The pension benefits of all these people are dependent on the investment returns of insurance companies and pension schemes. (Even public sector schemes such as the civil service and teachers pension schemes which are unfunded calculate contribution levels on the basis of investment returns.) Moreover, even people who only buy, for instance, home or car insurance, indirectly benefit from the investment returns of the insurance companies. Without this return premiums would be higher.

  • Graham Evans 28th Feb '17 - 7:22pm

    @ Michael BG. Regarding Canada, I note that you forgot to mention that in their 2015 manifesto, the Canadian Liberals also proposed to balance the budget in 2019.

  • @ Graham Evans

    Do you have internet links to the assertions in your last two posts?

  • Antony Watts 1st Mar '17 - 12:38am

    The UK is run by two things

    1. A vision and political strategy – currently neo-conservative (market decide all)
    2. Thousands of law implementing thousands of things

    Any party that want to gain power has to therefore project a political strategy, and the LibDems are somewhat there with this
    But LibDems also have to clearly say which laws specifically they will change, why, and in what way. Noe who is going to do that?

  • I am sure that those who feel left behind don’t feel that trickle-down economics works well for them.

    It’s not trickle-down economics, it’s basic economics.

    Shareholders want the businesses in which they hold shares to make money. The only way they can make money is by getting customers. the only way they can get customers is by providing them a benefit which is worth more to them than the money they spend.

    So just like the baker provides a benefit to the population by baking bread not from the goodness of their heart, but from their own self-interest, shareholders are compelled by their own self-interest to make sure that the businesses they own provide a benefit to the population.

    Because a business which doesn’t provide a benefit to the population will quickly find that none of the population wish to be its customers, and will go bust.

  • Graham Evans 1st Mar '17 - 2:56pm

    @ Michael BGHere is a link to the 2015 manifesto commitments of the Canadian Liberals to balance the budget in 2019

    Here is the link to the 2014 figures I quoted.

    And here is a more recent link.

    Here is a link to the distribution of the population by age, showing an adult population of about 53 million.

    If you look at the annual Report & Accounts of any company pension scheme you will find a breakdown of the three categories of beneficiaries, the associated liabilities and the investments which support these liabilities. I do not know whether these are publicly available (other than to beneficiaries) but local government pension schemes (as opposed to the civil service and teachers schemes) operate in exactly the same way and you should therefore be able to get a copy of the accounts for your own local authority.

  • Graham Evans 1st Mar '17 - 2:59pm

    @ Michael BG
    Incidentally, you will see from the ONS links that the numbers I quoted do not include members of Stakeholder schemes so the total number of beneficiaries of pension schemes of all types could be well in excess of 30 million, and as I said before auto-enrolment will boost the numbers still further.

    Lastly, perhaps I should explain why investments in equities by insurance companies subsidise insurance premiums. Insurance companies take on both short term risks (whether your mobile phone will be stolen, your house broken into or burnt down, or you fall ill while on holiday, etc), and long term risks (whether you die prematurely, loose your job, or develop an occupational illness thirty years after working for a company you left long ago.) The premiums for all these types of risk are co-mingled, but ultimately the liabilities are estimates. There can be no certainty, so reserves have to be built up to cover all eventualities. Theoretically these reserves could simply consist of cash – though the bank holding your cash might go bust – or government gilts. However both types of asset provide little or no protection against inflation, or in the event of overseas business, currency loses. Consequently insurance companies invest much of the premiums they receive in equities in the hope that they will outperform inflation, and indeed actually increase the reserves over time, allowing them to take on extra insurance business. Without this type of investment, insurance premiums would have to rise simply to ensure that there was enough money in the reserves to pay out in the event of both predicted and unpredicted claims. Indeed after the collapse of the boom in the early 1990s insurance companies faced a tough time because in real terms their equity investments failed to perform as expected – the so-called lost decade.

  • @ Dev

    We are not talking about the same thing. You are talking about consumers and I am talking about workers. Companies are setup and run to provide something to consumers and provide a livelihood to those who set them up. Of course a business will fail if there are not enough consumers for their products. However it is a rare company that is setup to provide a livelihood to just the workers and the more workers employed the less likely it will be run in their interests. I would like to see more businesses run for the benefit of all the workers rather than just a few and the non-worker shareholders. This is not to reject the idea that each business should provide a return to those who invest in it.

    With globalisation businesses are more concerned with keeping wages low and this is not good for those working in that business.

    It should be possible to run the economy so that wages are not low – the National Living Wage is an example of the way the government can intervene. It can also stimulate the economy so there are more jobs than people to do them and so force wages up in this way. It seems that most western economies were run in this way in the 1950’s and 1960’s. This is what I mean by running the economy in the interests of people rather than business. Low wages benefits business; full employment benefits people. It is just not good enough to encourage business if businesses pay low wages so there is a huge part of the population who are just about managing. It is just not good enough that there are people who are failing to manage on their income. In a liberal society no one should be failing to manage or just about managing as this restricts their liberty.

  • You are talking about consumers and I am talking about workers.

    Excuse me, but you wrote:

    ‘Businesses are not run to benefit the people ‘

    And I was pointing out that businesses are run to benefit the people. Tesco benefits the people by supplying them with groceries, Starbucks benefits the people by supplying them with coffee, Amazon by supplying them with books.

    All companies benefit the people: and they do so because their shareholders insist upon it, because if they didn’t benefit the people then they would go bust and the shareholders would lose their money.

    So you are wrong: businesses are run to benefit the people. They have to be, because if they don’t, or if someone else starts a business that benefits the people better, they cease to exist.

  • @ Graham Evans

    As you post as a party member I am surprised that you think the country should be run in such a way that there are lots of people whose liberty is restricted because of their economic concerns.

    I had not seen the promise to balance the budget in 2019, but the Canadian Liberal manifesto looks nothing like our manifesto in 2015 and I am not sure how far this promise makes the Canadian Liberals “Orange bookers”. Especially as I read somewhere that the promise was watered down during the campaign stating it will only happen if the economy has improved (but I can’t find the Huffington post now). Some reports imply that the Liberal government has given up on this promise:

    “note how much the Liberals have diverged from their election promise to run deficits of no more than $10 billion with a return to budget balance before the end of their mandate.”

    “the government has no plan to return to a balanced budget. In fact, the government is projecting a deficit of $14.3 billion in 2020/21 — a year after its current mandate is over. In other words, the budget leaves the task of balancing the books to the next government.”

    (March 2016

    We regard to those who are active members of a pension scheme, a deferred member and pensioners. The 2014 link states, “Please note that individuals may have more than one of these types of membership.”

    The 2015 figure given is 33.5 million with the same qualification. Therefore there are more than 11.8 million and less than 33.5 million. In 2015 there were 11.2 workers paying into these schemes.

    Even for the 10.6 million receiving pension payments the amounts they receive are in the majority of cases not enough to live on. So running the country to benefit even these 10.6 pensioners is not going to help those just about managing or who are failing to manage. The economy should not be run for only the benefit of between 11.8 and 33.5 million people but for everyone. Even if every adult was in a pension scheme or receiving a pension I still believe that it should be run so everyone is not just about managing or failing to manage. If every adult had enough shares so they could manage without paid employment then I would agree that the economy should be run for the benefit of companies.

  • Graham Evans 2nd Mar '17 - 9:18am

    @Michael BG No one is suggesting that the economy should be run for the benefit of one section of the population. This is why we have things like income tax and national insurance, corporation tax, rates, and many other direct and indirect forms of taxation and revenue raising. Your original post implied that there was a narrow section of society, “the rich”, for whom the economy was run. I was merely pointing out that running an economy in a capitalist society is far more complicated, and that the butterfly effect, so-called chaos theory, is as relevant to an economy as it is to the environment. Your approach does indeed seen reminiscent of much of the EU Leave campaign, in which all the problems of the UK were ascribed to the EU. This impression is reinforced by your claim that the EU is a pro-business and pro-globalisation institution, implying that it has no concern for the lives of its citizens. Perhaps you have forgotten than many of the rights which ordinary people in the UK now enjoy came not from the benevolence of Westminster politicians but directly from rulings of the ECJ, which is so despised by Brexiteers.

    Incidently, you suggest that there are plenty of ideas of how the economy could be run radically differently. What is lacking is any evidence that any of these ideas have actually improved the lot of most people, rather than merely replacing one elite by another, or as in the case of Venezuela done anything more than provide a short-term sugar rush to those who have been left behind.

  • @ Dav

    By “the people” I meant all people (which is normal usage) not just those who happen to purchase the goods provided by a company.

    A company that sells yachts does not benefit me and all people who don’t buy their produces even in your terms. Starbucks does not benefit me as I have never purchased anything from them. No company benefits all the people even under your strange definition. It is competition that sets the price not the good heartiness of the supplier.

    A “benefit” can be defined as “something intended to help”. It is not normally used to speak of with regard to wages or with regard to purchases. “Benefit” can refer to a “payment” and therefore if Tesco instead of selling me their products gave me their products then that would be a “benefit”.

  • Simon Banks 2nd Mar '17 - 3:16pm

    This is an interesting analogy – and no, it’s a different distinction from that between demagogues and bemused people. A Liberal Focus Team starting up in one ward of a Labour borough was definitely entrepreneurial. It wasn’t demagogic.

    Large, established businesses can fail slowly through not adapting enough – not realising how much the world is changing or why new challengers are taking their customers – but they can also fail fast through changing too much and alienating their loyal customers, abandoning what they’re recognised to be best at in order to compete at something else they’re not going to be best at. So for us the argument becomes about understanding our strengths and the nature of our support, both traditional and new, while thinking hard about how to adapt to new opportunities and threats. Simples.

  • @ Graham Evans

    I am clearly suggesting that there are lots of people who do not benefit from the way the economy is being run and as liberals we must address this and ensure that their economic situation improves faster than those whose economic situation has improved vastly more over recent decades. Perhaps you are too young to remember how people benefited from the economic policies of the 1950’s and 1960’s when economic inequalities were reduced. Since the 1980’s economic inequalities have grown not reduced. This means that there are lots of people who are not as free as they could be because their economic situation is not improving along with the gross economic growth of the country. I do not understand why you think running the economy so that inequalities are reduced and that those in the most well off economic situation do not have their economic situation improve as fast as the poorest and those in the middle is wrong.

    My original post divided the economy into the people and business. It was a criticism of the idea that if the economy is run for the benefit of businesses this will improve the economic situation of everyone. I did not use the term “the rich”. You have misunderstood me if you think, I think that the EU failed the UK. I meant the people without work in Southern Europe (Greece, Spain and even Italy) or the people of Eastern Europe who because of the economic failure of the EU leave their families and native country to live elsewhere as they believe they will have a better life in countries such as Germany and the UK. I believe the Euro zone and the economic policies countries within are supposed to carry out does not benefit lots of people living in Southern and Eastern Europe, but it benefits those running businesses.

    You are correct that in the past the EU did improve employee rights and this is a good thing, but it has little effect on the way an economy is run, unlike say the National Living Wage which hopefully will have a huge influence on the economy.

    Do you believe that the poorest 25% of the UK have improved their economic situation as fast as the top 25%? If the poorest 25% are not benefiting as much as the top 25% do you think liberals should change the way things are done to address this situation?

  • Graham Evans 2nd Mar '17 - 10:28pm

    @ Michael BG The normal way in which you help the poorest members of society is through upskilling the unskilled so that they can do the jobs that command higher pay, by redistribution of wealth through taxation and welfare payments, and by the provision of public service such as health and education These are essentially methods which revolve around the individual, and it is perfectly reasonable to argue about the appropriate balance, eg higher taxes and better resourced public services. However attacking companies which generate the wealth on which we all depend through punitive taxation simply leads to a downward spiral in the economy which benefits no one.
    Incidentally, the biggest beneficiaries of recent government policies have been pensioners who average household income was once way below that of working families but is now above.

  • @ Graham Evans

    Politicians have been saying everyone should be a skilled person for ages, at least from when Blair became PM, but the only period where there was significant and prolonged reduction in economic inequalities was during the period when economies were run to provide full employment (research of Thomas Piketty). There are a number of problems with a belief that only if everyone was skilled economic outcomes would be more equal. What are the skills that everyone should have? (Being an engineer is a skilled job, being a plumber is a skilled job, however is being an accountant or lawyer a skilled job or is it just one where a person needs to be good at retaining knowledge rather than being skilled?) Not everyone can either learn these skills or can absorb the knowledge. There are a number of sectors where employees do not need high skill levels (e.g. retail, hotelier, restaurant, agriculture, social care). It is these areas which employ the most foreign workers. The reason is that the wages are low in these sectors. Paying higher wages and improving working conditions in these sectors would make them more appealing to British born workers. Running the economy to provide full employment is not an attack on companies. It is am intervention in the labour market to create a situation where there are more jobs than people seeking employment and so market forces push up wages and so reduce economic inequalities. Companies will adapt as they did in the 1950’s and 1960’s. It is quite possible that companies will increase their investment, which is low in the UK compared with other economies.

    I am not against government intervention to provide financial assistance for retraining, but it has not been very successful over the last 20 years or so.

    There also might be other problems with the labour market; recruitment is often based on competences which works against those who believe they could do a particular job but do not have any evidence of doing the component parts of the role; UK businesses are not very good at employing people and then giving them the skills and knowledge to do the job, they would rather employ someone already trained.

    I am not a supporter of subsidising wages, which increased under the Labour government. Are you? Full employment and higher wages will mean the government will not have to provide “in work” benefits.

    I notice you have not answered any of my recent questions.

  • By “the people” I meant all people (which is normal usage) not just those who happen to purchase the goods provided by a company

    By that definition nothing ever benefits the people, for there is no single thing which benefits every single person. For any example, you can come up with someone who isn’t benefited by it. So that is a stupid definition.

    A “benefit” can be defined as “something intended to help”.

    No, it can’t. A benefit is something which makes you better off that you were before. Intention doesn’t come into it. It is perfectly possible for something to benefit you even if it wasn’t done for that reason.

    if Tesco instead of selling me their products gave me their products then that would be a “benefit”.

    Thanks to Tesco I can get my groceries all in one place and cheaper (because of their economies of scale) and at times which are convenient to me, because the local Tesco is open around the clock.

    If Tesco did not exist, then I would have to go to a local butchers, bakers, etc etc, meaning a shopping trip would take much longer, would cost more, and would have to be done in very restricted hours.

    Do you not think that that saving of time and money is a benefit to me? I certainly do.

    And around where I live, most people shop at Tesco, so most people are enjoying the benefit. So while, as I wrote above, there’s no such thing as something that benefits every single person — Tesco comes damn close to benefiting ‘all of the people’.

  • @ Dav

    When there is an “exchange” or transaction as in buying an item or selling one’s labour it is normal not to see anyone gaining a “benefit”. Your definition would also mean that when someone sells their labour they have a benefit. Your definition is a long way from the normal one.

  • Michael BG, you give as examples of low-pay sectors retail, hotelier, restaurant, agriculture, social care. And say higher wages would make them more appealing to British-born workers.
    But who pays for the pay rise? Shoppers, hotel guests, diners, shoppers again, and either the state or the vulnerable.
    High streets are already struggling, and as for social care…
    If British farmers pay higher wages, then either the cost of food goes up for everyone, including the unwaged. Or, supermarkets import cheaper produce from countries where production costs are lower.

  • @ CassieB

    My example of low paid sectors was an argument against Graham Evans and others who believe that the way to reduce economic inequalities is having everyone doing skilled jobs. My argument is that these types of jobs will still need doing. My alternative is to have everyone being paid higher wages because the demand for labour is higher than the supply of labour. In this situation those people who at present find it difficult to get employed or are under-employed will be employed or fully employed. This, along with higher wages, will increase the amount governments can raise from taxation to pay the increased wages for those working in say social care. There are still going to be pensioners and others who will need state assistance, but again with full employment and a larger tax take the government will be able to afford to pay increased levels of benefit. With higher wages the government will save money because it will not have to pay out “in-work” benefits.

    Agriculture is a sector which faces foreign competition and this competition might make it difficult for them to increase their prices but I saw on Country File there is new farm machinery available which will reduce the need for agricultural workers. As I also pointed out UK has a poor investment record and higher wages will ensure that business will need to invest to survive. Also with higher wages and investment productivity should increase and this might mean prices may not need to rise.

    High Streets are struggling because consumers are either shopping out of town or on the internet. This is a consequence of market forces. I don’t think the correct answer is to allow High Street shops to pay their worker low wages and for the government to subsidize their wages with “in-work” benefits.

  • When there is an “exchange” or transaction as in buying an item or selling one’s labour it is normal not to see anyone gaining a “benefit”.

    That’s exactly wrong. In fact when buying or selling an item, both parties get a benefit. In fact if you think about it, they must both get a benefit or why would they engage in the transaction?

    Think about it. I have some money, but no food on me, and I am hungry. Well, I can’t eat coins, can I? So I go to the baker’s. The baker has lots of bread, but at the end of the month they have to pay their rent (as well as their suppliers, staff, etc, and have some left over for themselves), which they can’t do with bread.

    So I exchange some of my money for some of his bread. Now I have food to eat, so I am no longer hungry — a benefit for me, right? And the bake rhas money that they can use to pay their costs, and maybe go on in nice ski-ing holiday to the Alps in the winter. A benefit for them.

    This is the most basic building block of economics: every transaction involves both sides benefiting because they are exchanging something they don’t value as much for something that they value more. If I am hungry I value bread more than money, because I can’t eat money, so I exchange money for bread and I get a benefit.

    And the baker bakes me bread, not out of the goodness of their heart, but because they want my money.

    Scale it up, and this is why shareholders, in order the keep getting their benefit of dividends their shares not becoming valueless because the company goes bust, must keep pressing on those companies to provide benefits to their customers, so that those customers keep coming back.

  • (Similarly when selling one’s labour: one in that case has time, but one needs to pay the rent. An employer, on the other hand, has money, but also work that needs doing. So the employer pays me for some of my time, and so I gain a benefit (money to pay the rent) while the employer also gets a benefit (the work gets done).

    Again, we see that the basic building block of economics is mutually beneficial transactions. This applies as much to selling one’;s labour as to buying bread or any other transaction.)

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