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Four economic boosts when all we’re offered is “responsible capitalism”

On Thursday, I wrote about how in the wake of Osborne’s latest budget, Labour continues to buy into the incompetent neoliberal myths that the government uses to justify their programme of austerity. If only the problems stopped there!

Sometimes, when it looks like the left is offering an alternative, it can still fall into the neoliberal trap. Take the so-called ‘responsible capitalism’, as Duncan Weldon, the TUC’s Senior Policy Officer endorses in his recent article calling for supply side reforms.

I have some sympathy for Weldon’s argument – we’re both from the North East, after all! He raises important points – but his article is largely an opaque endorsement of supply-side economics and ‘The right kind of growth’, with some quite glib justifications in the name of Attlee and Wilson.

“Supply-side socialism” is something that was largely coined under the revisionism of Neil Kinnock as a way of capturing the middle-ground. As Weldon himself points out, the key aim of economic growth should be to raise the living standards of middle-earners. This fits well into Miliband’s rhetoric for “responsible capitalism” and the “squeezed middle”, but essentially says our neoliberal model is fine save for a few tweaks, and it isn’t.

Weldon points the finger at dependence on low wage, low skill set as a supply-side problem, hoping the revolution will come from the middle. But British manufacturers are actually asking for something different to Britain’s obsession with the finance sector – both in terms of policy dominance and downright adulation.

My alternative solution would be four-fold. First, we need a root and branch industrial policy which commits a Labour Government to putting some of the risks of major industrial infrastructure on the Government’s balance sheets.

Second, we need a new narrative in industrial relations with trade unions. That means greater legislative tools for negotiating bigger pay increases on government-undersigned projects. Rather than what we’ve seen with the banks, who despite being undersigned by government have had the uncanny knack of getting rid of their lowest paid and lowest skilled.

Thirdly, to get rid of classes two and four of National Insurance, which have been a millstone around the lowest paid and small entrepreneurs alike over the past decade. Class two is a flat tax which benefit’s the rich, and class four is a progressive tax that hits middle earners hardest, but shows no benefit for their contribution to ‘National Insurance’. That is, it’s not recorded as a contributory tax, and does not go to towards benefits or the state pension. So if you are sacked from a middle earning small or medium sized contractor overnight, you will be entitled to no job-seeker’s allowance, despite your sizeable contribution to the state. This is surely against every principle of the welfare state. If you earn a large amount of money as a Class 2/4 self employed person, you get away with paying a relatively small amount of National Insurance.

The fourth is an enduring commitment to a financial transaction tax. This will do far more than raise revenue and cut symbolic ties to the affectations of the finance sector. It will lower the obsessive speculation that has overtook predatory investors in the City. The prices of commodities like copper have risen massively due to speculators, making it impossible for smaller firms to contain such massive price rises in a core product of the building and manufacturing trade.

The strategy won’t be easy, and more importantly reaching a consensus happens to be a bad thing in economics: you tend to end up in a tepid, socially frustrating situation like neoliberalism! The markets need clarity to understand what their risks are, and capitalists want to make money just as much as we want to achieve social aspirations. There’s nothing in the rule book so say we can’t do both. But without breaking the chains of what has become a turgid, tired set of economic policies aimed at grabbing the low-hanging fruit of “political credibility”, we won’t have any meaningful change in reaching any of our aims.

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