A Positive Policy for Economic Empowerment

The CBI’s reaction to John McDonnell’s employee share ownership plan was to be expected. Not only might such a plan place an initial administrative hinderance on many firms throughout the country, but in the longer term the ability for workers to lever shareholder power over executives shifts the dynamics of executive/employee power.

These are the arguments the CBI could be making – namely, that the plan is disruptive to business. Instead, across the media an almost myopic rebuttal to McDonnell’s plan can be heard. There are claims the plan will reduce productivity, reduce business investment, and drive businesses aboard, ultimately harming jobs. Above all, the CBI claims that such legislation is unnecessary as businesses already give employees the chance to become shareholders.

Partly due to disdain, partly due to inaccuracy, and partly due to the political and economic climate we find ourselves in, these arguments may be dismissed.

Consider productivity. As the Office for National Statistics (ONS) reports, UK productivity since the financial crisis has increased from an indexed value of 95.7 to 100.7. Over the 10 years prior to 2008, productivity increased from 84.9 to the cited 95.7. Of course, these are simply the figures for a problem that has not gone unnoticed: in March, July and August of this year the Financial Times (amongst others) highlighted the UK productivity issue, with a speech by the Bank of England’s chief economist Andrew Haldane on the issue being published in June.

The CBI’s claims that McDonnell’s proposal will harm productivity seems to ignore the elephant in the room, therefore: there is already a productivity problem in the UK. What is interesting, and in many ways encouraging, is that this plan may actually increase productivity, with even the CBI acknowledging that employee ownership often has a positive effect on employee motivation and thus productivity.

Of course, a productivity argument might be made when considering reduced business investment. The argument might go that the burden of this plan will disincentivise businesses to invest, causing productivity gains from new technology will be lost. Unfortunately, business investment since the financial crisis hasn’t changed much either, going from an indexed value of -0.3 in 2008 to 0.2 in 2017 (figures from the ONS). In other words, whilst business investment, or lack thereof, may drive productivity growth, given there has been very little business investment over the past decade it is a dubious argument to attack Labour’s proposal with the threat of further disinvestment.

Though this ignores a wider point. If employees have an ownership stake in businesses, they can encourage and thus counter any disinvestment that it is claimed might occur. Why? Well, following the prevailing theories of investor motivations, those employees/shareholders will want to maximise their return just as all other investors would. This, ultimately, is a more compelling argument than I think is immediately obvious: just because 10% of the company is owned by the employees, it does not mean the remaining 90% of shareholders are going to tolerate disinvestment and the forgoing of profitable endeavours. Presently, executives attempt to maximise shareholder value; they do not care who the shareholders are.

Perhaps, however, the best way to maximise such value is to move abroad and avoid Labour’s proposal. Ignoring the administrative costs of doing such a thing, let us take note of two things. Firstly, as a consequence of Brexit, firms are already leaving this country. For many, the question will be asked what difference will this policy really make? Secondly, this supposed threat of emigration has been raised countless times, be it in opposition to higher corporate taxes, greater sector regulation, increases in wages or trade union bargaining power and so on. Many times, politicians have bought into this threat – implicitly underestimating the value of the UK to these businesses – and have not acted. Now many look around and see the barren, economic desolation that such concessions have brought them. For a great many workers, if the price of keeping these businesses is low corporate taxes, low regulation and weak workers’ rights, low wages and little bargaining power, their desire to appeal to business to stay will be found to be lacking.

For a great many, now is the time to call business’s bluff.

Finally, we must address the claim by the CBI that many firms already allow employees to become shareholders, often by allowing said employees the opportunity to purchase shares at a discounted price. This statement is true, and to be sure it’s generally a positive idea. But it is not fair to bring up such a statement in the context of McDonnell’s proposal.

Whilst those working on the shop floor or the assembly line will be given these share purchase opportunities in their lifetimes, for those who are struggling to pay their rent or struggling to put food on the table because their pay is so low; for those who cannot afford to pay into their pension pot, or perhaps must leave the heating off in the winter; for those people, no matter how good the share offer is objectively, they will never be able to part-take. And even if they did, what power would their voice have versus the vast ownership shares of angel and institutional investors?

For the CBI to dismiss John McDonnell’s plan because similar means of empowering workers already exist, they are either blind to the realities of the everyday worker, or they are intentionally selling a false equivalency.

To be sure, the details of this proposal need to be checked, and checked again. It is foolish to assume all the nuances are known, all the problems are ironed out. But given the arguments offered thus far, primarily by the CBI, this plan remains – in my opinion – a positive policy for economic empowerment.

Leviathan

This week marked the closest Theresa May has been to being removed as prime minister since her disastrous general election result in June. A now infamously bad speech, cabinet infighting and a general perception of her being weak have made her departure, in the eyes of many, inevitable, even if for the time being not immediately forthcoming.

Depending on who you ask (or, depending on the interviewee’s political leaning) the problem facing Mrs. May and the Conservative party in general is either Brexit, or a lack of clear, coherent and compassionate domestic policy. The discrepancy in reasoning is caused merely by respective actors emphasising their strengths – the issue is the same regardless: there is a lack of direction in Theresa May’s government.

This, in the opinion of many, will be fatal, if for no other reason than cool-headed reliability to do a task they have been asked to do is proudly promoted by many Conservatives as the modus operandi of the Tory party. A lack of direction, and by extension an inability to effectively deal with the tasks at hand, all serve to damage the party doubly as they damage the Conservatives the government and the brand.

This is why Theresa May is most certainly a dead woman walking. The very fact she is still walking is because the crisis facing the Tory party is systemic, rather than a sickness held in the head. The most likely candidate to replace her is Boris Johnson, eluding again to the behemoth of Brexit that is crushing this government and, it must be said, most of Westminster. An election of Boris as leader of would almost certainly smother some of the Brexit fires, but would leave other flames to burn out of control. It would also reinforce the perception that the Tories are out of touch; according to YouGov, he has never been more unpopular.¹

In what is now becoming a list of problems, the Conservatives find themselves with another: Mrs. May can’t lead but must, whilst Mr. Johnson can lead be must not. If we were to muse as to how to solve this problem, one might take it as a joke when I refer to a snake, but it is not. A leviathan in the context of history is one that unites various warring tribes through its singular might. Politicians might be snakes, but are any leviathans?

The apparent consensus is no, but that’s hardly creative thinking. Brexit has caused all of this mess, and perhaps it can fix it. Mrs. May faces an increasingly difficult task in leaving the European Union, whilst Brexiteers breathe down her throat, and the masses of young Remainers at home flock to Jeremy Corbyn. As a political move, calling a second referendum on Brexit may solve all three of these problems.

Assuming that, given the chance to vote again, a coalition of mobilised youth, terrified metropolitan elite and regretful middle-Englanders might reverse the result, Mrs. May may save her premiership. Talk of Brexit would be over, allowing her to focus on a strong domestic agenda and give her party an important sense of direction. Equally, it would cripple the hard Brexit wing of the party – including Mr. Johnson – through a shift to the centre ground. The result would be alienation for Boris and co.

Finally, Mr. Corbyn (whom I have spoken little about) would have his wind knocked out of his sails as his legions of supporters would, in a manner of speaking, side with the enemy. To put it another way, Mrs. May would be offering the young something only a prime minister could offer, and the young would be hard pressed to refuse.

As a solution, of course, it is not perfect. There would be accusations of old wounds opening (though, I would retort, that said wounds never closed) and it is certainly short-termist – the problem of Europe would continue to plague the Conservatives for years to come. But as I have written previously, this will be the case regardless.²

Though these are not the major flaw with this plan. The major flaw is the assumption that the result would be reversed. Just as Mr. Cameron did before her, losing the referendum would result in Mrs. May’s resignation. But so too will a ‘no deal,’ outcome, or simply a strategy of waiting it out. Mrs. May is on a collision course with failure, and only a risk might rectify that. If ever there was a time for bold and brave (if not necessarily strong and stable) leadership, let it be now. Call a second referendum.

¹ https://yougov.co.uk/opi/browse/Boris_Johnson

² http://stuartmmills.blogspot.co.uk/2017/07/how-do-you-solve-problem-like-brexit.html

Everyone's cross about Brexit

After the general election, Nicola Sturgeon is quietly bleeding. For all the respect I have for the woman, I do not want Scottish independence, and it seems much of Scotland agrees. She’s walking wounded. However, that didn’t stop her making one of the most sensible suggestions I’ve heard in a long-time: that Brexit should be negotiated by a cross-party delegation.¹

The idea sounds immediately brilliant. So brilliant in fact I have to wonder why is isn’t what we’re already doing? It sounds democratic, and representative and conciliatory. But that’s not what we’ve got.

Instead, in the furore and fallout of the 23^rd of June 2016, we got Theresa May. She capitalised on Brexit, perhaps trying to look strong and stable, later announcing what she thought Brexit meant² (Brexit, obviously…) and what her plans for the negotiations were.³ Some even began calling her Supreme Leader⁴ for her style of control.

And yet now we have a general election result which has destroyed the Supreme Leader in the most painful of ways,⁵ and it has (accidentally) thrown the questions of how and who re: Brexit wide open. YouGov recently did a poll which showed support for Mrs. Sturgeon’s idea (an idea, let’s be honest, that only came about because Sturgeon hasn’t gotten what she really wanted), with 51% of participants wanting a cross-party delegation.⁶

Now, 51% isn’t much of a majority, but considering Brexit is an issue because of 52%,⁷ I’d be hesitant to dismiss the poll quite so soon if I were a Tory Brexiteer.

That’s besides the fact that YouGov were one of the few pollsters during the general election that seemed to get anything close to the actual result.⁸ Indeed, we can criticise methodology sometimes – and I very much encourage people to do so – but right now YouGov are having their moment in the sun.

The idea seems sensible for another reason. If the government of the day must lead the talks, who will lead when we don’t exactly have a legitimate government? Of course, we can debate the word legitimate, and yes Corbyn didn’t win, but neither did May, or anyone else for that matter. Following Mrs. May’s own mantra, surely now she must cede some control of the talks to Labour, the SNP and others? Surely, a Brexit for Britain should be a Brexit that represents Britain, no?

But this will not happen. For the same reason that Mrs. Sturgeon’s current weakness has prompted her to soften her position, Mrs. May must harden hers. To cede any say to any other party, to give Mr. Starmer or anyone else (besides maybe someone of the Northern Irish⁹ persuasion) a seat at the table, or to make Corbyn look even vaguely legitimate as a leader, undermines her near hollow position.

For Mrs. May, the noose is already around her neck. But in the name of Tory preservation the party has stayed the execution. A cross-party delegation would almost certainly cause her to fall through the floor, and she knows it.

¹ https://www.theguardian.com/uk-news/2017/jun/12/nicola-sturgeon-calls-for-may-to-pause-brexit-negotiations

² http://www.independent.co.uk/news/uk/politics/theresa-may-brexit-means-brexit-conservative-leadership-no-attempt-remain-inside-eu-leave-europe-a7130596.html

³ https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech

⁴ https://www.theguardian.com/politics/2017/apr/30/kim-jong-may-awkward-and-incredulous-as-journalist-asks-question

⁵ http://www.bbc.co.uk/news/election/2017/results

⁶ https://yougov.co.uk/opi/surveys/results#/survey/e066e170-4f56-11e7-8ead-1eb0da735179/question/0f1bd200-4f57-11e7-81f3-2ab0a50a8b9c/toplines

⁷ https://www.bloomberg.com/graphics/2016-brexit-referendum/

⁸ http://www.independent.co.uk/News/uk/politics/election-results-hung-parliament-exit-poll-yougov-latest-conservatives-labour-winning-a7780401.html

⁹ http://www.express.co.uk/news/politics/815141/Election-2017-DUP-Theresa-May-Arlene-Foster-Brexit-coalition

So... Who Won?

Elections are like high school drama. You kind of hate them, but you also secretly adore them. Though I’ve got to say, this election might be the first I’ve found genuinely exhausting. I suppose maybe it’s because I’m getting old, or maybe it’s because it’s a nice day up North (that’s not a political nod to anything) and as I watch the coverage – eyes glued to the screen, obviously – the Sun is dehydrating me. Like the election, there’s a lot of things to consider.

Or maybe I should say blame. Who does Theresa May blame for what is most certainly a huge loss, but at the same time is technically a win? Who does Jeremy Corbyn blame for Labour’s indisputable loss that has the smell of victory about it? Who do the electorate blame for telling them there’d be a landslide victory, and (not so subtly) who do the TV pundits blame for giving them terrible polling results?

This is a weird election. I believe all elections can be weird, if you drill down into the demographic data enough, but this is weird because you don’t need to do that too much.

Let’s look at turnout, which was at its highest point since 1997¹ and particularly high amongst young people² (there is a figure of 72% doing the rounds, but as the BBC points out, there’s no reliable data yet). Lord Ashcroft published an article on June the 6^th noting that the number of Tory seats falls as the voter turnout rises.³ It’s worth pointing out that Ashcroft’s model predicted a Tory majority, even under high turnout scenarios – “The higher turnout scenarios, meanwhile, estimate a lower range of majorities,” so maybe Ashcroft isn’t the best go to guy to talk about turnout data.

The point is this – if the Tories knew that a high turnout would go against them, then, just from data alone, we must place some blame for the result at the door with all those people that chose to, well, step out of their doors and vote.

One thing that was in Mrs. May’s pocket, one thing she could rely on to win, was Brexit, no? Even I wrote on the 31^st of May, “If tonight's debate is about Brexit, Theresa May will win even in absentia.” Certainly, early in the night some commentators were finding comfort in the fact that Leave seats were seeing a smaller swing compared to what the Exit Poll would suggest, but one must ask the question: if the British public believed in a Conservative Brexit, indeed, if they believed in Brexit at all, why didn’t Mrs. May win a majority?

Some will bark that the referendum result shows the British public clearly care about Brexit, and others will argue that the collapse in the UKIP vote⁴ (from 13% in 2015 to 2% today) shows that Brexit was a trump card for the Tories. But that’s a reductionist view of UKIPers (I find that statement oddly ironic). In my mind, there’s three reasons for the collapse in UKIP. The first is the Hard Brexiteers have defected to the Tories, accounting for some fall in UKIP and some rise in the Tories. The second is that the (potential) rise in the 18-24-year-old vote essentially diluted the UKIP vote, and what we’re seeing isn’t necessarily movement (on this, I very well could be wrong. I’ve not been able to compare the raw number of votes to confirm this idea). The third is that many of those who voted for UKIP don’t care about Brexit.

This sounds dumb. UKIP, almost undeniably, were a one issue party, which was Brexit. Yet, as many in the media seem to forget, UKIP for the longest time were a protest vote too. And Brexit, in my opinion, was more of a vote against the establishment order than anything to do with the EU. So, when Theresa May runs on Brexit (and UKIP run on enforcing the integrity of Brexit), many UKIP voters just don’t care. She’s establishment, and some would argue, responsible for many economic issues facing the lives of that group. And Corbyn, the leader of the (still) second largest party, markets himself as outside the establishment, and importantly, as anti-austerity.

If Brexit isn’t as big an issue as the media and the Tories think, and austerity is the real creature that they must slay, then the picture quickly emerges of why the result was what it was.

But what of the media? They told us this election would be dull. There were murmurs of low election turnout;⁵ Brenda articulated in the most adorable when the sense of fatigue the whole country felt. And yet on the night (and throughout the election, let’s be honest) it wasn’t boring. In fact, little of what the pundits said turned out to be true, except for of course the Exit Poll, which many, “[couldn’t] believe.”

In fact, many of the pundits seemed so sure that no one saw that result coming. Except… YouGov⁶ and Survation⁷ saw it coming about a week ago. Now, to the credit of at least the BBC, they acknowledged that those two polls were bang on the money, and that they, with their commentary, had missed a trick. What was that trick? Well, both YouGov and Survation factored in a higher number of young voters than other polls.⁸ There’s that old stick-in-the-mud again.

I’m not going to say much about the Tabloids that, on both sides of the argument, were far too dispelling in their coverage. Nor am I going to linger on the problems the mainstream media had covering this election, in terms of being correct or being complacent. I can be accused (rightly) of both myself. And of course, the Exit Poll, YouGov and Survation were (to varying degrees) off in their predictions. But the media must realise that they’re losing creditability, and that’s bad for all of us. Did they play a factor in the election, perhaps as a whispering sound in Theresa May’s ear as she was walking on holiday?⁹ I think someone should be asking what role the media will play in the future.

And that’s about it. Well, it’s not. Theresa May was a disastrous candidate with a horrible manifesto, whereas Jeremy Corbyn was (by most reporting) a disastrous candidate with a popular manifesto; the Dementia Tax swung the polls more than Labour ever actually did;¹⁰ nationalism remained a prominent force, whilst whispers across the channel played their role too; “Strong and Stable,” repeat ad infinitum. I don’t see the point of talking about these things, because I don’t need to. Switch on your TV and absorb the analysis, with a free side of cross-analysis thrown in.

I’m trying to get to a point, and I think it’s this. Firstly, the youth vote (probably) swung this election massively, which is good for democracy, bad for functioning government, and a much more significant trend than it is currently being given credit for. Secondly, Brexit wasn’t the issue it was meant to be. That’s not to say it didn’t matter, but Brexit is derivative of austerity policy, and is not in itself the cause of political turmoil. Austerity (amongst other policies, such as Social Care) drove this election result; if anything, Brexit is this election’s cousin, not it’s father. And thirdly, the media got predictions very wrong throughout the campaign. Some will say the media was horribly biased; all I’ll say is it felt frustrating at times, and caveats exist for a reason – use them!

Anyway, I’ll see you in Autumn… (maybe)

¹ http://www.ukpolitical.info/Turnout45.htm

² http://www.bbc.co.uk/news/election-2017-40220032

³ http://www.conservativehome.com/platform/2017/06/lord-ashcroft-my-election-models-probabilities-suggest-a-potential-conservative-majority-of-64.html

⁴ http://www.telegraph.co.uk/news/2017/06/08/ukip-heading-huge-loss-vote-share-2017-general-election/

⁵ http://www.independent.co.uk/voices/theresa-may-general-election-tony-blair-brexit-turnout-young-people-barely-democratic-a7691321.html

⁶ https://yougov.co.uk/uk-general-election-2017/

⁷ https://uk.reuters.com/article/uk-britain-election-poll-survation-idUKKBN18Y390?il=0

⁸ https://www.theguardian.com/politics/2017/may/31/yougov-poll-predicting-hung-parliament-brave

⁹ http://www.independent.co.uk/news/uk/politics/theresa-may-snap-general-election-wales-walking-holiday-husband-easter-robert-peston-uk-prime-a7689046.html

¹⁰ http://www.telegraph.co.uk/news/2017/05/26/conservative-poll-lead-cut-half-dementia-tax-u-turn/

The Power of Glossy Ring-Binders

There are two economic problems in the UK. The first is that far too many politicians and members of the commentariat do not understand economics, and advocate (for the past 7 years) a fiscal policy that doesn’t work. The second is those that champion the opposing fiscal approach – what, I suppose, might be called Corbynomics – do not know how to communicate the rationale of their approach.

The issue in both regards is political narrative. Most would agree that textbook intelligence does not make one a savvy politician; it carries that the same is true in reverse, that one can be a savvy politician and academically rather ignorant. Political narrative is a broad statement, but for the purposes of this piece I say it means this: how one shapes facts, or mistakes, to suit their own political agenda at that time.

The reality is austerity is the kindred spirit of conservatism. Small government, low taxes, individual responsibility. Austerity accomplishes all those things. It also appeals to a very guttural concept of living within one’s means, running a country like a household – the Swabian housewife. It sounds so terribly sensible.

Conservatives utilise this economic strategy so well because it has a relatively low barrier to entry. It is easy for the laymen to understand, and it is hard to argue against without sounding crazy. Surely the way to reduce debt cannot be to borrow more money? That’s not how household finances work.

As an aside, the Swabian housewife strategy – known sometimes as the Swabian housewife fallacy – is what cost Mr. Milliband the 2015 election, in my opinion. (Maybe not, it’s hard to say). By running on a watered down Conservative austerity strategy, Milliband was embracing the fallacy, but doing it with a backdrop of economic discreditably (another fallacy; public debt under Labour was lower in 2008 than when they took power in 1997, it was only in 2008 when the financial crisis hit that public debt became ‘problematic’) which was never going to work. The Tories just make austerity look so much sexier.

And now enter stage right Mr. Corbyn, running on an anti-austerity economic plan. Of course, in the political narrative the Conservatives have shaped, Corbyn’s vast spending plans seem ridiculous – remember, how can you spend your way out of debt? But Corbyn’s strategy is the right one (generally speaking) because one cannot cut their way out of debt either.

Let’s return to the household analogy to explain. If you must reduce household spending to meet outgoings, you do so. But what if you get to the point where you can’t afford to eat, or heat your home, or pay the rent on your home (austerity, by its very nature, targets those that rely on the State more than those who don’t, so it will disproportionately affect renters more than home owners, so rent is, economically, a sensible barometer for this analogy)? Well, then the household no longer exists. Good job. I guess eradicating the household is kind of like securing it?

Austerity works when you have growth. In a recession – by definition – you don’t. In a stagnant economy (which, in my opinion, the UK’s is) you also don’t have growth. All cutting does, at least in the short-term, is shrink the size of the economy, reduce the level of investment, and reduce growth. When the financial sector is doing a good enough job of reducing economic growth, we don’t need the government to do the same.

Finally, if you want proof austerity doesn’t work, look at the UK economy right now. Brexit is a convenient scapegoat (or at least distraction) for many problems in the UK public sector, but it is actually a symptom of austerity. So too is the underfunded NHS, or the underfunded education system, or the underfunded police, or the underfunded armed forces, or the… You get the picture. 

After 7 years of trying this economic policy, is hasn’t worked, and for some, that’s a hard pill to shallow. But if aneconomic policy is failing citizens, then it is a failed economic policy.

Most people know this – certainly Corbyn does. That’s not the point of this piece. I said before there are two economic problems in this country. I have addressed the first problem, but now I must address the second.

Corbyn does not speak in terms of economics. Neither does McDonnell, or many of the Labour inner circle. Blairites speak economics, but their brand is technocratic and pseudo-conservative. Theresa May should not win this election. Basic services required for provision by government aren’t being provided, the Tory manifesto is rather unpopular (at least the less popular of the two major parties) and she has an ever-growing reputation as a flip-flopper. But they are winning, and even though as I write that gap is shrinking, they’re still winning.

Why? Because the Conservatives set out their stall in simple ultimatums. They present their version of facts and explain their ‘plan’ calmly in simply steps, all bound (I’m sure) in a glossy ring-binder. Everything they could be saying might be wrong, or a lie, but on their shop front it doesn’t matter – they’re attracting the most punters.

Corbyn needs to learn to construct a political narrative – a shop front – that does the same thing the Conservatives do. To some Corbynites this will sound like heresy. But if your product is good, and you tell people why it is good (maybe by utilising a nice glossy ring-binder and PowerPoint presentation), they’ll buy it. And they’ll buy it even more if it’s the only alternative to the faulty product that’s been on sale for 7 years.

The issue currently is that Corbyn doesn’t seem to want to be this type of salesman, to have this type of political narrative. He’s more than happy being the guy with the megaphone shouting about unbelievable bargains that people acknowledge sound great, but also think are maybe dodgy knock offs or too good to be true. Where’s my evidence for this belief? Just look at Diane Abbott and her policing figures, or Corbyn himself and the child care costs: simple mistakes that aren’t fatal to the campaign, but are wholly unnecessary.

I despise political narratives. But they’re how the game works. So long as our democracy is universal and not Socratic, they are a sad necessity.