Rethinking Policy

The numbers are stacking up on the economic consequences of Covid and now, the Conservatives could be the big spenders of the next decade. The Labour Party is uneasy. Whichever party holds sway, strategy is all about imagining the future and mapping the best way to get there. As Covid swirls, the cheque books are out and the ideas firing policy are all too often just as analogue. Let's imagine some more ...

First up, the tax system is shot. We live in an economy where well over 95 per cent of firms are classified as SMEs employing fewer than 50 people; many of them struggle to have overdraft facilities to allow them to grow and, many startups are reduced to growth funded by credit cards. Beyond furlough, business rates and payroll taxes are a dis-incentive to expand businesses and hire people. Worse still, global BIG tech companies pay neither or minimize exposure in their webs of offshore companies that may be good news for rootless shareholders but bad news for those who stay loyal to stakeholders across communities. 

What of our future workforce? It is estimated that 2.6 million schoolchildren live below the poverty line in England alone, and Ofcom estimates that about 9% of children in the UK - between 1.1 million and 1.8 million - do not have access to a laptop, desktop or tablet at home. More than 880,000 children live in a household with only a mobile internet connection. Try writing a business plan or a proposal on your smart phone.

We hear so much about innovation and keeping pace with digital developments. There is no doubt that digitalization is transforming whole swathes of society. The future has arrived; it is not evenly distributed. We have moved from agriculture to industry and then on to services. Now, we are in the throes of automation. There are clear gains to be had but the downsides bring us back to which book written by Adam Smith do you favour. Are you a fan of the Wealth of Nations (1776), the invisible hand (mentioned but once in the text) and market-based solutions or, of his clear foundational emphasis on ethics in political economy with the Theory of Moral Sentiments (1759)? 

Markets are an essential part of setting prices and forcing the pace on innovation but all too often the big guns are manipulating them to short sell here or, crowd out the small fry. Just look at the top ten players in any global industrial sector to witness well over 65 per cent of market share in the hands of the top ten players. This is not competition; markets are being let down. If we were really market led, why not sweep aside all of the subsidies and caveats on our transition to Zero Carbon and levy a simple carbon tax. This is simple economics; every product has a price, and the margin emerges as the costs to produce and deliver are subtracted - except that we don’t take the costs of carbon emission from field to fork or loom to room into account. Why? A simple carbon tax at borders, as argued by Dieter Helm, would solve the problem. 

A word about Luddites. They started out questioning the owners of machinery that would have them starve. It was more about the dignity of man and the need to keep a foothold on what is known as Maslow’s hierarchy of needs. These days, a Luddite could be someone who questions how social media is manipulating data that they extract from what would once have been the commons and then, make money on it. This is where digital innovation shifts to exploitation. The Tech Titans are borrowing your watch to tell you the time, renting the use of it back to you as they build their ARR. Then, they ask you to press the “like” button as they fly. As a side-line, they are making money out of the democratic process itself; banish Trump but retain the Alt-Right enablers. Social media is being subsidized and blatant indiscretions tolerated.

Covid is teaching us the harsh reality that we are not safe until we are all safe. Extend the view away from a zero-sum game we have become addicted to and the world could swing behind: climate change, education, the digital divide and healthcare issues far wider than Covid. Above all, we need to deal with the elephant herd in the room – the millions in both the so-called developed and developing world who earn their keep and live out their lives in the informal economy. Why are people across the developing world unable to own their own homes legally? Closer to home, the reality of a precariat feeding off zero hour contracts has landed with the pandemic. 

The commentariat speaks of automation and some raise the spectre of AI, in the words of Stephen Hawking, as “man’s last invention”. We have been here before. In 1911, the UK census had huge numbers of the working population in domestic service or with horses. By 1921, 40 per cent of these jobs had disappeared to be replaced by others using emergent technologies like cars and vacuum cleaners. And yet, as futurologist Tofler once made clear, high tech needs to be balanced by high touch. Covid has taught us the value of front-line workers – though their wages remain low. When are we going to factor in the value of empathy and for this, society has to pay?

We need a global agenda based on human rights. All Governments who represent the people should be led by people on fixed terms; lifetime deals should be cause for sanctions and the funds into the UNs strategic development goals. Boards need to be representative of stakeholders as well as shareholders – just like in Germany. The tax system has to have a global dimension or loopholes become the sole justification for globalization. One last thought. Before the First World War J P Morgan, the American Financier, remarked that if the ratio between the CEOs salary and the average employee rose above the mid 20s there would be civil unrest. In 2017, James Dimon of the JP Morgan Chase Bank earned 364 times as much as the median bank employee. Whatever the facts, as with the tech titans, are we comfortable with the outcome? To use a card playing analogy - do we stick or twist?