‘It’s the economy stupid’…remember that phrase? It’s more relevant today than ever and the failure of capitalism to adapt post the 2007/08 crash, and its economic consequences, is a key reason for the rise of populism and the political crises we currently face.
An excellent article in the FT last week, ‘Why American CEOs are worried about capitalism‘ highlighted the growing concern of leading business people about the future of the current economic system. You can see why. Inequalities of wealth are rising. The gap between CEOs’ remuneration and their workforce is expanding rapidly to pre-crash levels – a multiple north of 300x. Obscene.
Stock markets and corporate profits are at new highs but a Republican ‘man of the people’ President has cut corporation tax, shovelling more money into the pockets of the rich.
In a Gallup poll last year 51% of American 18-29 year olds had positive views of socialism, similar to previous polls. But the proportion with a similar view of capitalism has fallen from 68% in 2010 to 45% now.
The article makes reference to fear starting to compete with greed. Do captains of industry worry about a revolution? Possibly but it is a bit ‘rich’ taking lectures from the likes of Jamie Dimon, Chairman and CEO of JP Morgan Chase, the epitome of aggressive free market capitalism, when he apparently paid himself $30 million last year.
Closer to home, inequalities of wealth are rising despite a more progressive taxation policy. This has been written about in these blogs before but if you own a house in the UK and have investments, the last dozen years or so have been good to you. If you work in the public sector, rely on rented accommodation and state benefits, they have not.
All this inequality, fuelled by social media of course, has led to voters’ anger and rightly so. But the solution so far has been populism. Oh dear.
Politicians speaking directly to the less well off, blaming globalisation, corruption and seeking solutions in economic nationalism are tempting siren voices. You can’t blame ordinary voters for supporting this analysis since everyone else has mostly failed to implement reforms that address core inequalities.
But the temptations should be resisted. Actions such as leaving the EU or the election of Trump and Italian and Eastern European populist governments for example will not improve the lives of voters. They will ultimately make people poorer, and at the expense of weaker democratic structures.
Responsible governments and, equally important, business, need to wake up, reduce disparities of wealth and work in the interests of all stakeholders. Global corporations need to pay their taxes! More long-term investment in infrastructure, social housing, health and well-being generally, and green technology in particular, to improve the environment we live in, is required. There are some good initiatives outside government from supporting organisations such as Focusing Capital on the Long Term (FCLTGlobal) and Coalition for Inclusive Capitalism to make our economic systems work better but these are barely scratching the surface.
This is an argument for the survival of mixed economy capitalism not a replacement of it, supported by democratic, transparent institutions. Our economic structures need to get back to their more inclusive past otherwise the lurch to populism will continue to the detriment of all of us, not least those most economically vulnerable.
Inside Right Politics 