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  1. Comment
6 October 2021

Boris Johnson’s demand for higher wages is an opportunity for the left

The only way to deliver the high-wage economy the Prime Minister wants is to break with Britain’s capitalist model.

By Paul Mason

Britain, says Boris Johnson, is moving “towards a high-wage, high-skill, high-productivity economy that the people of this country need and deserve, in which everyone can take pride in their work and the quality of their work”.

I can only imagine the delight on the faces of the Tory-voting managerial class. They, together with the consultancies and big shareholders who call the shots in boardrooms, have spent 40 years building a low-wage, low-skill, low-productivity economy and they’re being urged to change. Their current obsession – firing and rehiring entire workforces in order to drive down wages and remove favourable conditions – is just the latest in a decades-long project to boost profit at the expense of labour.

Above all, says Johnson, there will be no further reliance on migrant labour: he revelled in the failure of his own scheme to attract a meagre 5,000 HGV drivers from Europe. The mere 127 who’ve applied, he says, are proof that haulage industry owners will need to invest.

Johnson’s conversion to the high-wage economy is welcome – because it is undeliverable under 21st-century capitalism. Flailing amid the supply-chain crisis, a severe labour shortage and rising discontent among the Red Wall voters who put him in power, Johnson has inadvertently reinvented the Trotskyist “transitional demand”.

In his 1938 “Transitional Programme”, Leon Trotsky pioneered the idea of demanding something from capitalism that sounds great, and can technically be delivered, which in fact undermines the entire workings of the system and brings it down: wages linked to inflation; workers’ control of industry; state control of the banks. The clash between the legitimate desire and the impossibility of its fulfilment, Trotsky argued, would mobilise workers to bring down capitalism.

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In a way, Johnson, whose statements on the labour shortage demonstrate zero economic literacy, has unleashed the same dynamic. Britain cannot be a high-wage, high-productivity economy because its entire economic structure is shaped around the priorities of speculative finance. That was not a product of evolution but a choice made by the Thatcher government in the 1980s.

From the speculative building of luxury apartment blocks, to the proliferation of coffee chains as the high street dies, to the systematic outsourcing of public services to private contractors, to the buy-to-let boom, everything in the economy is geared to servicing financial profit. And financial profit is not like the profit of a factory or a grocery store. It does not rely on productivity or hard work. It relies on the social power of people who have monopolised capital: who can charge what they like for access to money and take their profits in the form of rent deducted from the profits of other people.

That is the British economic model. It means that any young person lucky enough to inherit a million pounds would be stupid to invest it in an entrepreneurial venture, risking everything on the vagaries of invention and competition. Easier to enter the forex trading world, stick some of it into Bitcoin, or start a service business dependent on wealth trickling down from the rentier’s table: bailiffs, security guards, high-end chauffeur.

The results of this change – turning the UK from a productive, social-welfare economy to one based on rent extraction and poverty – is shown in the decline of the wage share of GDP from 64 per cent of GDP in the mid-1970s to 54 per cent on the eve of the Covid-19 pandemic. Though a 10-point decline may not sound drastic, it is once you realise that economic theory predicts the share between capital and labour rewards should be constant.

Margaret Thatcher unleashed a revolution that siphoned money out of the wages system and into the financial system. To undo decades of stagnant wages, you don’t just have to persuade some haulage firms to install portaloos in lay-bys. You have to reverse the society-wide decline in the wage share at the expense of the profit share. You have to, in short, force British capitalism as a whole to make fewer profits.

It could be done. The entire design of Labour’s 2017 and 2019 economic strategies was to achieve this overtly. You would have to suppress speculative finance; tax property speculation out of existence; chase down tax-evading capital to its Caribbean bolt-holes; empower business managers against the demands of big shareholders; tax the wealth of the rich instead of just their income. And you would have to both incentivise private investment and commit to massive, long-term public investment.

This is an opportunity for the left. In the short term, it is an opportunity for the new generation of trade union leaders to move on from organising Uber drivers and food couriers to coordinating national wage demands from entire sectors. If the union bureaucrats were to pursue a £15-an-hour minimum wage demand across the board, targeted at all major industries and sectors, with the same vigour with which Keir Starmer opposed it at Labour conference, they could electrify the country.

Johnson wants a high-wage economy, they could argue, let’s give it to him. And since he desires an economy rich in productive investment, he must will the means to create it – which is a state-owned business bank and a system of co-management within firms, where trade unions and managers take long-term decisions jointly and union membership is obligatory.

Five years ago it would have seemed like an ultra-left fantasy to suggest this. Yet Johnson’s catastrophic decision to pursue hard Brexit even at the cost of amplifying shortages of energy, physical supplies and labour has presented the working class with a historic opportunity. 

British productivity, which was already low compared to the UK’s peers, has barely grown since the 2008 financial crisis. There was a surge in hours worked but no concomitant rise in output. The Cameron-Osborne years not only inflicted needless austerity, eviscerating every public service from defence to social care; they also cemented the high-hours, low-wage culture into the private sector as a norm.

Johnson is entirely wrong to believe that by limiting the supply of migrant labour, “supply and demand” will sort things out. As his Tory forebears discovered in the 1920s, supply and demand does not really work in labour economics: the labour market is “sticky”. People do not readily move jobs and homes in response to higher pay elsewhere, nor do wages automatically rise.

For all the anecdotal evidence of sudden pay hikes for HGV drivers and cocktail waiters, there is no comparable trend in the care home sector, while public sector pay has been frozen as part of Rishi Sunak’s new austerity programme. If Johnson really wants a high-wage economy, limiting the supply of migrant labour is one of the most foolish ways to try to achieve it. It will bring entire sectors to their knees, even without the physical supply crunch that will likely build in 2022.

The solution, in the short term, lies in exactly the measures Labour has proposed: the abolition of zero-hours contracts, the end of fire and rehire, an increase in Universal Credit payments, and the return of national pay bargaining and labour market institutions to set wage rates across low-skilled sectors. Alongside this we need dramatic public investment – in public housing, public transport, energy and skills. That means borrowing more and taxing more.

But in the medium term, Britain cannot be a high-wage economy unless it dismantles the system of financial extraction and speculation under which luxury apartments lie empty while working families crowd into rotting former council flats and pay exorbitant rents.

Enough with euphemism: we need to squeeze the rich until the profit share of the economy falls back to where it was in the days of Slade, Arthur Scargill and Sid James. That would be progress.

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