Any Manifesto needs to be based on clear principles.
Here are mine, which are based on good evidence.
SUSTAINABLE ECONOMIES: HEALTHY SOCIETIES
Some underlying truths
There is an intimate relationship between the organisation of economies and the health of the societies which they should serve. High levels of crime, low educational attainment, poor health outcomes, low trust and social exclusion are all more marked in societies that encourage inequality and give the interests of finance, large corporations and the rich primacy over those of the majority of the populace.
Some on the right have taken to describing their societies as “broken” without recognising that their economic and social policies actually stimulate poor health, high rates of crime, educational underperformance, low productivity and economic decline.
Instead of trying to solve the underlying causes of malaise, they act by trying to repress the symptoms, thus worsening the problems.
Fundamentals that should guide political strategies
- Gross inequality of wealth and opportunity is a profound evil that undermines all societies and destroys social cohesion.
They directly foster inequality of opportunity. The pattern of economic development in free market countries has seen the rich and powerful take the lion's share of wealth, leaving a growing portion of the populace struggling to live decent lives. Those in the more deprived segments are known to suffer from poorer physical and mental health and to live considerably shorter lives. They also tend to suffer from poorer educational provision than the wealthy and to have considerably less economic opportunities. Unemployment is passed down the generations and becomes the norm in deprived communities. Social deprivation becomes a permanent state and crime flourishes in poor communities. Social cohesion becomes a major problem in unequal societies.
Addressing these serious malfunctions requires multiple interlinked strategies that address industrial regeneration, developing technical, craft and social skills, educational segregation, fair taxation and rebuilding deprived communities from the inside. It is the work of several generations, but that is no reason for delaying immediate step-by-step actions.
Exactly the same dynamics apply in developing societies - only the effects are much more marked and often accompanied by even greater corruption.
- Trust and collaboration in Society is a mainspring of social and economic health
There is growing evidence that large swathes of the population are becoming seriously distrustful of politicians, bankers and top managers.
There is also good evidence to show that in high trust societies, it is easier to formulate economic and social policies, even difficult ones, and implement them without coercion, detailed targets, auditing and control.
Exactly the same applies to enterprises. Those with high trust have been demonstrated to have lower costs of control, higher levels of motivation and initiative-taking and therefore more sustainable performance. The UK is a low-trust society and this is a major factor in blocking consensus on how economic and social problems can be tackled. Strategic paralysis and damaging “flip-flops” in fundamental policies are the likely results, resulting in continuing economic decline.
Rampant inequality is the primary cause of distrust and alienation right through society. There is a serious need for programmes that address inequality and then that seek to rebuild community cohesion by high involvement from the inside.
- Smooth, continuous economic growth is not possible - striving for causes instability, environmental degradation and unsustainable expectations.
The reliance of developed economies on growth is causing environmental stress, but equally important is fostering a general expectation that living standards can improve for ever. In unequal societies, continuous growth is necessary to keep the living standards of poorer people at near-tolerable levels. When growth falters, the plight of the poor becomes desperate. Healthy societies should aim for economic stability, equality of employment opportunity and modest sustainable growth across a wide range of sectors.
- There is no shortage of money in the world; it is simply not used properly
The world is awash with money. Much of it is locked away from society in tax havens and banks in secretive countries. Some of it is owned by the mega-rich, many of whom seek to minimise their tax. More is subject to tax avoidance by large corporations. In Britain, it is estimated that more than £70 billion annually is lost through tax avoidance and more billions through corporate and finance sector fraud. These amounts far outweigh oft-publicised benefit fraud.
Much more still has been wasted by investment banks indulging in speculation, bundling mortgages and other risks into complex packages that are simply sold within the banking sector, circulating vast amounts of money, drawing substantial amounts out to fund bonuses. Nearly all of the huge flow of money is wasted and not put to any useful economic or social benefit.
Tax havens are a festering sore that fuel crime, money laundering and tax evasion. As well as instituting and enforcing fair domestic taxation, these centres of corruption must be dealt with by domestic and international action.
- Consumerism is undermining democracy, citizenship and long term economic wellbeing
It started in the 1930's in America. Politicians began to realise that if the populace was hooked on consumption they would be happy to work to increase their possessions and run up debt to pay for house ownership and “lifestyle”. These commitments, they theorised, would make the people politically docile. This marked the start of the age of consumerism. Fed by massive and increasingly sophisticated advertising, large parts of the populations in Britain and the US have become hooked on owning “stuff” and pursuing celebrity lifestyles. Consumer advertising techniques have infiltrated politics too. Now, too many people consider themselves consumers rather than citizens, fostering envy, distrust and selfishness. This tendency has also spread into community life. Many people draw a direct comparison between what the pay in to society in tax and the benefits they draw out rather than considering the public interest. All of these developments have devalued citizenship, undermined community spirit and caused disillusionment with politics itself.
The “hard” message is not about austerity - it is that we must consume less in order to invest for the future.
- Banks and the finance sector are conduits through which savings is invested. They do not create wealth by themselves, they should support wealth creation in the real economy
The primary roles of banking should be to encourage savings by investing them prudently. They should be accountable to their clients for their investment strategies. Their second important role is to invest in the “real” economy to support long term economic development. Profit is realised by creating a positive margin between returns from investment and interest to savers. This is the way it used to be, and the way it should be today. Instead, there are massive global investment banks that use savers' funds to speculate uncontrollably in a wide range of unproductive instruments, keeping assets inside the banking system and destabilising economies.
Such is their power that they can almost directly control political priorities - witness austerity programmes controlled by the opinions of “The Market”. Their power lies totally outside democratic influence and must be brought back so that banks serve the interests of people rather than the opposite.
It is inconceivable that this can be done without radical bank reform and the creation of national investment banks responsive to industrial strategies.
Policy responses that include: Using public debt to prop up failed banks - creating austerity programmes to reduce debts - reducing GDP and tax take as a result - cutting still further to address resulting economic decline and mounting debt - are ignorant and deeply damaging responses to festering problems that originate from inside the global financial system.
- Government is not the problem. Good government in partnership with other stakeholders in society is a crucial part of the solution.
There is no developed country that did not utilise political power to establish and foster national economic and industrial interests. Today, most successful economies have collaborative relationship between government and other stakeholders to direct and encourage investment that short-term market pressures are unlikely to support. Even in the United States, supposed bastion of free markets, the government supports banks, agriculture and industry by open and hidden subsidies and restrictions on free trade. A prime example is the massive hidden subsidies from the defence industries into aerospace and technology.
There are powerful interests that postulate that government should stay out of industrial policy and investment (“picking winners”) and reduce the size of the public sector which is theorised to “crowd out” private investment.
Healthy societies encourage active collaboration between all major stakeholders in society in both the formulation and implementation of economic and social strategy. Increasingly those that foster conflict are suffering both social and economic decline.
- Unfettered “Free” markets favour the rich and powerful.
An underlying tenet of market fundamentalism is that markets provide an even playing field for all to participate and that they can be “perfect”, with key information available to all. Nothing could be further from the truth. These beliefs bely a fundamental aspect of human psychology. What we have witnessed over time is the rich and powerful seeking to shape the “game” to their advantage. Big finance and corporations lobby government for their own interests - and then seek to bend markets so that confused consumers are helpless. There is no such thing as an equitable free market. Adam Smith (frequently quoted as an admirer of free markets) understood that markets must be rigorously regulated to protect the interests of the majority.
- The social costs of economic decisions are seldom counted. In reality the national debt of grossly unequal countries far exceeds the quoted numbers. The costs of inequality, deprivation and unemployment are massive and act as a drag on economic health.
The UK is a grossly unequal society. In reality, this means that a considerable portion of the population live in deprived urban clusters, separated physically from the richer segments. Those who live in such circumstances suffer from lower educational attainment and diminishing employment prospects as unskilled work opportunities decline. The percentages of the UK population who are functionally innumerate and illiterate are 23% and 22% respectively. In Sweden, these figures are 7% for both and in Germany 14% and 10% (2006).
The effects are low productivity and a high proportion of unskilled people. The “gap” has for some years been filled by immigrants, but this is not sustainable without serious social unrest.
Most social crime is committed by people from deprived communities. The costs? Some £60 billion per annum. To this can be added the costs of poor health, particularly obesity and poor mental health (£70 billion+); and of course the huge costs of unemployment. The prison population in Britain is about 130 per 100,000 people as opposed to 69 in Sweden, a markedly more equal society. It does not take high numeracy to realise that the hidden costs of inequality and social deprivation are massive. Equally costly are the consequences of low trust and depleted social capital. But these costs and missed opportunities are not counted when decisions about economic balance and investment priorities, banking and taxation are taken.
- Private profit and public service are essentially incompatible.
There is mounting evidence that letting the market manage public services can be highly dysfunctional. Most public services need a single-minded dedication to the “clients”. There is such a thing as a public service ethos. Seeking profit from services that should be solely directed to public wellbeing undermines this. Collaboration, not competition, works best in such services as health, research, and welfare provision. US healthcare - and in the UK, infrastructure building, national transport and the ruinous Private-public “partnerships” provide strong evidence of this. Attempts to “marketise” health and other services will undermine the provision of uniformly good services for all.