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

Photo: Martin Whitfield
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Labour MP for East Lothian Martin Whitfield: "I started an argument and ended up winning an election"

The former primary school teacher still misses home. 

Two months ago, Martin Whitfield was a primary school teacher in Prestonpans, a small town along the coast from Edinburgh. Then he got into an argument. It was a Saturday morning shortly after the snap election had been called, and he and other members of the local Labour party began discussing a rumour that the candidate would be an outsider.

“I started an argument that this was ridiculous, we couldn’t have a candidate helicoptered in,” he recalls. He pointed out that one of the main issues with the Scottish National Party incumbent, the economist and journalist George Kerevan, was that he was seen as an outsider.

“I kept arguing for an hour and a half and people started gently moving away,” he jokes. “About two days later I was still going on, and I thought enough’s enough.” 

He called Iain Gray, the Scottish Labour veteran, who interrupted him. “He said, 'Right Martin, are you going to put up or shut up?’ So I filled in the forms.

"Then I had to have a very interesting conversation with my wife.”

One successful election campaign later, he is sitting in the airy, glass-roofed atrium of Westminster’s Portcullis House. Whitfield has silver hair, glasses, and wears a Labour-red tie with his shirt. He looks every bit the approachable primary school teacher, and sometimes he forgets he isn’t anymore. 

I ask how the school reacted to his election bid, and he begins “I have”, and then corrects himself: “There is a primary four class I had the pleasure to teach.” The children wanted to know everything from where parliament was, to his views on education and independence. He took unpaid leave to campaign. 

“Actually not teaching the children was the hardest thing,” he recalls. “During the campaign I kept bumping into them when I was door-knocking.”

Whitfield was born in Newcastle, in 1965, to Labour-supporting parents. “My entire youth was spent with people who were socialists.”

His father was involved in the Theatre Workshop, founded by the left-wing director Joan Littlewood. “We were part of a community which supported each other and found value in that support in art and in theatre,” he says. “That is hugely important to me.” 

He trained as a lawyer, but grew disillusioned with the profession and retrained as a teacher instead. He and his wife eventually settled in Prestonpans, where they started a family and he “fought like mad” to work at the local school. She works as the marketing manager for the local theatre.

He believes he won his seat – one of the first to be touted as a possible Labour win – thanks to a combination of his local profile, the party’s position on independence and its manifesto, which “played brilliantly everywhere we discussed it”. 

It offered hope, he says: “As far as my doorstep discussion in East Lothian went, some people were for and against Jeremy Corbyn, some people were for and against Kezia Dugdale, but I didn’t find anyone who was against the manifesto.”

Whitfield’s new job will mean long commutes on the East Coast line, but he considers representing the constituency a “massive, massive honour”. When I ask him about East Lothian, he can’t stop talking.

“MPs do tend to say ‘my constituency’s a microcosm’, but it really is Scotland in miniature. We have a fishing industry, crabs and lobsters, the agricultural areas – the agricultural soil is second to none.” The area was also historically home to heavy industry. 

After his first week in Westminster, Whitfield caught the train back to Scotland. “That bit when I got back into East Lothian was lovely moment,” he says. “I was home.”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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