|In its editorial of 1st October 2011, The Times of London, in commenting on the Labour Party Conference, under the heading “Anti-Business, As Usual”, penned this warning, “…Ed Miliband boldly took his party in the wrong direction in its relations with people who create wealth and can foster growth in output and employment in this country.”
When I read those words, I was struck with the impression that the writer half-doubted what they wrote, judging by the attribution of courage to what was, in their view, such a wrongheaded course.
|Another reading of this phrase could be that the writer dared not offer an alternative analysis, and so the word “boldly” was self-referential critique.
What is expressed in this sentence is a repetition of a common right-wing political meme – the assertion that a nation’s wealth is only created by business enterprise. The rightwingers don’t seem to understand the foundational role that public health provision and welfare play; they don’t understand the value of public works in creating long-lasting genuinely common assets; and have been telling us for decades that state spending is an anathema, with no justification.
A private company stays in business if it makes a profit. If stocks and shares in a company are publicly traded, then the business has an obligation to its shareholders to make a profit. A profit is the surplus of the value of goods and services sold. The value of the output must exceed the fixed costs, including the cost of labour.
What in effect happens is that the employees sacrifice some of the value of their labour for the benefit of the enterprise. So, no, it’s not the business that creates wealth, it’s the people that work for it. If they could go into production without being employed by the business, they could make higher personal incomes.
Money doesn’t disappear, unless it’s locked up in a safe deposit box – businesses spend their profits into the general economy, and wealthy executives and business owners are renowned for their valuable consumer goods and services purchases. However, the whole process has removed control of the surplus from the employees to the business, and therein lies a problem – the business may value short-term financial survival over long-term employment-led profit.
I’m sure that Ed Miliband, like many politicians, understands socialism, as articulated by Karl Marx “From each according to his ability, to each according to his need” – no one should be left behind, regardless of their age, ability, health, intelligence, beliefs, knowledge, standing, gender, faith, orientation… While it’s true that many businesses create social goods, the question is, would it be more efficient to omit the middleman and go straight for publicly-owned social enterprise – avoiding the margin falling into private control ?
Is it best that a large proportion of the surplus of production is devoted to the upkeep of society ? A good half of the UK’s national budget deficit was created to save the banks from collapse under the weight of dodgy financial products – eliminating that public debt has been made a priority, and the only place to liberate expenditure is from social health and welfare programmes. Yet reducing these budget lines means that the fabric of society, its infrastructure, the things we all rely upon, will be on the chopping board. But without publicly-paid-for roads, schools, hospitals, local authority waste disposal, how could a business make a profit ?
Like insurance, if everyone donates a little, from the proceeds of our work, towards the social welfare budget, everybody benefits and nobody loses out. We have to return to supporting this National Insurance, rather than trying to whittle it down. With a smaller national safety net and support structure, businesses will not make so much profit, as they will need to meet some of these social goods from their own budgets.
And with less social spending, businesses become less capable of creating new employment – as their potential sources of revenue dry up. For example, many national and local government contracts are fulfilled by private business. With higher unemployment and worsening public services, the citizens and organisations that would have been the customers of private enterprise are no longer in a position to buy their wares.
A contracted economy, with the banks making decisions on the basis of risk instead of the basis of opportunity; less people with incomes; more people with lesser incomes; and a squeeze on all kinds of public funding, will make private business more cautious in taking on new employees, and more ready to make current employees redundant.
The British economy does not appear to be able to create jobs at present – the public sector has lost many jobs in the last year or so, but the private sector has not created an equivalent number of employment roles.
Without social spending, production will be lower, and so will consumption. It’s hard to claim, therefore, that business is capable of creating wealth and jobs in the current crisis.
The Times, Saturday 1 October 2011
“Re-engineering the Economy”
“Britain requires more ambitious investment in infrastructure and more
“Reviving the British economy is a huge challenge. The task involves
“For years, Britain lived beyond its means, buoyed by ever increasing
“What Britain needs now is thus not merely recovery from recession: it
“Stepping up investment in infrastructure will not only stimulate the
“But to do so on the scale required will need a big cultural change.
“The Olympic Park development shows that Britain can carry out big
“The shambles that is government airport policy is an example. To
“Renewing Britain’s energy infrastructure is one of the biggest
“The coalition has inherited some promising initiatives from Lord
“Re-engineering the British economy is a daunting prospect. But our
“Anti-Business, As Usual”
“Ed Miliband’s conference speech has jeopardised Labour’s relations
“Labour’s prospects of returning to government dimmed this week as the
“The speeches at Labour’s conference in Liverpool this week by Ed
“Until the party’s most senior people show the seriousness that is due
“What little prospect there was of an immediate reconciliation between
“It is not that there is nothing in Mr Miliband’s distinction between
“Mr Miliband’s serious error was to suggest that the bad businesses –
“The classic account of the social democracy that Mr Miliband espouses