This
post mainly uses examples from the UK, but I suspect much the same story
could be told in many countries. The reaction
to Obama's criticism of Wall Street was extraordinary, until perhaps
you realise that in the US political support is sometimes a commodity
that corporations and the wealthy can buy. I return to the US at the end of this post.
I am
sure the employment regime
that existed at 'Sports Direct' would horrify anyone. A system of
discipline that penalised taking time off sick such that ambulances
responding to emergency calls were regular visitors to the factory.
Many of the staff were not paid
the minimum wage. This is what can happen when the majority of
workers are not represented by a union, and local jobs are scarce, or other employers are not much better. We
know about it because of the work of investigative journalists, but
there are few of them left so how many other cases do we not know
about?
A
long time ago the Conservative party represented business, and the
Labour party represented employees through their links to trade
unions. In the 1980s the power of the trade unions was significantly
reduced, and Labour leaders even thought they could gain votes by
attacking some union actions. Since then, Labour have avoided ever
siding with workers in industrial disputes. This continues under the
current leadership: Labour did not
even endorse the junior doctors strike. As a result, we can ask who
represents employees against exploitation by employers within the
workplace, and who represents society against rent seeking by
employers at the national level?
The
Conservative party was and still is the party of business. As Aeron
Davis notes,
even in 1997 only 7% of the business community voted Labour and 69%
voted Conservative, despite all of Blair's efforts to show Labour was
business friendly. In the last election business leaders did all they
could to support the Conservatives, both financially and with
explicit support. When this tight link between a political party and
business is combined with an ideological belief among many in the
party that regulations such as those that support employees are 'red
tape' that needs to be cast aside, we get a mix which is potentially
dangerous for employees and society.
We have seen
many examples of bad business behaviour since the 2015 election, such
as the emission test scandals.
In some cases governments, being ‘business friendly’, actively
helped
with that deceit. Other examples are here,
or here,
or here,
or here,
or here(FT)/here/here/here/here, and that is not even counting the financial sector.
It is estimated
that over 200,000 employees are paid less than the minimum wage they are entitled to (HT Jo
Maugham).
The
links between the party and business, and an instinctive dislike of
regulations on business, does not of course necessarily mean a
Conservative government will automatically create an environment
where abuses of employees and customers can flourish. As George
Osborne showed when he increased the minimum wage, politicians can
act against type. But it would clearly help in avoiding business
exploitation if the Conservatives faced an opposition that felt free
to be critical of business.
That
is what Ed Miliband tried to do when he was Labour leader. He put the
issue
of producers versus predators, or as an economist might put it wealth
creating versus rent seeking, at centre stage. Labour also proposed
some relatively mild measures to reduce inequality (e.g. the mansion
tax). The latter in particular were unpopular with CEOs. Partly as a
result, we saw near universal endorsement of the Conservatives from
business leaders.
An
interesting question is why this should be seen as a problem for
Labour. The answer has to be that approval by business is seen by
many voters as a mark of economic competence. Of course economists
know that running a business is very different from running the
economy. In addition, as I think Justin Wolfers said, when a businessman claims economic expertise, remember: business is about enriching yourself, economics is about making us all better off. But
the media environment encourages a rather different view. Economic
issues, unless they are of major importance, are typically discussed
in business sections or segments.
I
have personally never understood the prominence that business news
has in all parts of the media. For example, are there really that
many people who want to know the daily movement in stock markets
around the world every hour on BBC 24 hour news? More worrying is how
often
business leaders and business representatives get media coverage
compared to representatives of employees, particularly at the BBC.
(Business leaders also seem to beat economists at the BBC, as Justin
Lewis noted about the 2015 election. This has been repeated during the referendum
campaign. This is despite the public trusting
us more than business leaders. [1])
The
result of all this may be that Labour wants to avoid appearing
anti-business. The Blair/Brown regime went out of their way to
cultivate business, and were famously relaxed about the large
increase in inequality at the top that occurred before
their time. It is not totally ludicrous to claim that the UK
financial crisis, the biggest example of business mistakes adversely effecting society for many decades, might have been partly a result of this.
The
current Labour leadership is unlikely to repeat that mistake. But the
problem remains that the Conservatives will throw the anti-business
charge the moment Labour adopts any measures that restrict business
freedom or threatens the incomes of business executives, and
business leaders – for reasons already explained – will back them
up. If this leads to a significant number of voters concluding that
Labour are not competent to run the economy, we are in danger of hard
wiring bad business. As Luigi Zingales observes in this perceptive
article,
although
there is a deep distrust of crony capitalism among many Republican
supporters, they still elected a crony capitalist.
[1]
In Justin Lewis's article, he notes that “newspaper
partisanship directly influenced the broadcast news agenda”.
Perhaps this is the most plausible
explanation for many of the BBC's biases, together with –
ironically – a fear of being too left wing, as Jack Seale reports
with a great quote from Robert Peston.
