Thomas Piketty speaks at an IPPR event at King's College in London on April 30. Photograph: Getty Images.
Show Hide image

You’ve read Piketty, but what to do about it?

We need a strategy to disperse capital ownership and strengthen employee voices. 

The Piketty bubble is now seemingly only matched by London’s property market.  Yet where the latter is worryingly detached from economic fundamentals, the former’s analysis of the dynamic of capital accumulation rigorously underscores what many already feel. The stark inequalities of power, wealth and income that capitalism generates is not an aberration or pathology but rather inherent to its normal functioning.  This power imbalance in our economy underpins the UK’s poor productivity record. When one third of people are afraid in some way at work, a fifth of workers – and growing - earn less than the Living Wage and the bottom half of the country own only 2 per cent of the wealth, it is not surprising that our productivity rate is now 16 per cent below the average of other G7 nations, the widest gap since 1994. These inequalities seriously corrode the potential of sharing a common life together as democratic citizens.

Yet if inequalities of power and reward undermine both the health of our democracy and the vibrancy of our economy, crucially Piketty also shows how public policy, guided by the democratic interest, can tame the inegalitarian tendencies of capitalism and better channel its creative potential. Piketty’s proposed solutions, including a progressive global wealth tax, have been criticised on the grounds of practicality. But the problem is not his ambition – few people know the history of tax policy in advance – but rather that his solution does not address the root of the issue: who owns capital and who has claims on return to capital. What is required instead is a strategy to build new institutions that can disperse capital ownership claims, democratise the workplace and make finance a useful servant not a dominant master. In essence, a step-by-step democratisation of the marketplace to give people a genuine stake and a say in their place of work.

IPPR’s new report - Fair Shares - sets out how to begin dispersing both economic power and strengthening new forms of employee voice. Firstly, a new tax-advantaged profit sharing scheme could ensure all employees share in collectively created success. It would alter the balance of power and reward between labour and capital whilst putting money in people’s pockets. In France, where profit sharing is compulsory for firms with more than 50 people, over €6.7bn was distributed to millions of workers in 2012. Democratic profit sharing, where all employees participate and vote on the levels of the share, has been proven to successfully boost productivity, wellbeing and commitment.

Secondly, how power and profit is distributed is profoundly shaped by how a company is owned and structured. The dominance of the PLC model intent on maximising returns to shareholders should give way to greater pluralism that rewards a much wider range of committed stakeholders. We therefore recommend ways to improve funding and support for the mutual, co-operative and employee owned sector. Corporate governance should also be reformed to account for a wider range of interests. Similarly, firms should be governed more democratically, with strengthened mechanisms for employee engagement and influence at work. Fair Shares therefore sets out new institutions of workplace democracy, such as introducing an ‘employee working life forum’, that would learn from the successful economic democracies of Germany and the Netherlands. We also suggest potential new avenues for collective bargaining in the workplace to help ensure everyone is represented at work.

Finally, deep concentrations of economic power will only be reversed if finance is made to better serve the productive capacity and social needs of the UK. We need new forms of patient, democratic finance, such as new co-operative capital funds, Solidarity Investment Funds as practiced successfully in Canada and a greater role for public financing of companies through a Small Business Administration unit that has proved so successful in the USA, Singapore and Germany. 

For progressives, institutional conservatism tempered by sporadic bouts of what Roberto Unger called "vulgar Keynesianism" cannot achieve the programmatic dispersal of economic power that is required. Instead, a focus is needed on building new institutions of democratic wealth and influence in the economy that can drive innovation, competitiveness and a future of broad-based prosperity for all. While there are of course significant vested interests that would resist the democratisation of the economy, it is a challenge worth pursuing. After all, as Raymond Williams argued, "to be truly radical is to make hope possible, rather than despair convincing".

Mathew Lawrence is Research Fellow at IPPR

Getty
Show Hide image

Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.