A previous post suggested that the global situation – for example, challenges to the rules-based economic order of the postwar period, regional military clashes, the advent of a mode of buccaneering Capitalism, reminiscent of the C19, a pandemic, and climate challenges – is unstable to a degree not seen since the mid-C20. A key component of that instability is growing wealth inequality. Internationally, Social Democracy has conscientiously played the liberal democratic game, clung to a shifting “centre”, and sought, with the best of intentions, to mitigate the impact of instability and inequality.
Current mitigation approaches are at best partial and limited and at worst, ineffectual. The policy framework and associated tools required to moderate or reverse inequality are currently not deployed. Moreover, the political arguments needed to support that framework, and make it viable politically, are not widely espoused.
Ways forward have been offered, from wage-led growth to Piketty on taxation. The emergence of discussion around these issues in the deep waters of NZ Labour is promising. Piketty, of course, suggests that the achievement of a fairer alternative economic model will be hard work. Piketty’s realism highlights the difficulty in renewing a modern Keynesian Accommodation. He may be right, but we must try; the alternative is barbarism on a global scale.
Received wisdom that Labour has six years or more to sharpen its arguments and settings on inequality is lazy thinking. The three-headed hydra now in its birth throes does not exude an air of stability and jointness of purpose. It is clearly intent on support for increased inequality.
This brings me to a model with roots in 1960s Keynesian thought:
Productivity + Taxation + (Economic) Democracy = Distribution + Equity
Labour should be as focused on production as it is on distribution. Labour’s job is not simply to distribute such resources as accrue to the state; it is to promote production and trade that underpin fairer distribution, but under particular conditions. These conditions include democracy and an effective response to climate change.
Productivity is a fraught term. For workers, it often means increased work pressure for less than equivalent rewards. Readers of “Capital” will nod at this point, and they will be right. However, that broad debate about over-production and under-consumption is for another day. For now, let us conceive of changes in the labour process, in technology, in the length of the working day and elsewhere, which increase productivity and also improve dramatically worker incomes.
Those incomes generate taxation, but the key focus of taxation changes should be on the dramatic narrowing of incomes, wherein a combination of wealth and other taxes flatten inequality and support improved wages and salaries and broader social provision. Flatter wealth structures allow more widespread saving and further productive investment. A flatter wealth profile also underpins social cohesion.
Democracy, in two forms, safeguards these arrangements. The first – political democracy – is well founded in some nations, yet, even there, has been subject to erosion over the last five decades. Elsewhere, it struggles. Political democracy must be strengthened. The second is the unfulfilled promise of the liberal democratic model – industrial democracy. Political and economic democracy were once understood as the two interlocking spheres of a democratic system. Collective bargaining is a step towards industrial democracy; its practice is important, but we should consider alternatives – cooperatives and other community and workforce-owned arrangements – that work against inequality.
Distribution and equity may be left for now. What is clear is that “more of the same” does not tackle effectively the growth of inequality. “More of the same” also, through each iteration, makes the needed changes all-the-more difficult to make. NZ Labour must grasp this nettle, or court irrelevance.
Nigel Haworth
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