Pro-business, or pro-market?

Rob Marchant thinks Labour should become more pro-business. I’m not sure.

We should make two big distinctions here.

One is between business and entrepreneurship. The bosses of many big businesses are not entrepreneurs who risk their own money to set up companies, but are bureaucrats and salarymen.  Tesco‘s Philip Clarke, RBS’s Stephen Hester and Sainsbury’s Justin King, to name just three prominent figures off the top of my head, joined large companies straight from university. They are no more entrepreneurs than the Labour member working in the public sector.

You might object here that Labour should be the party of small business and entrepreneurs. Maybe. But there’s a danger that, if it becomes pro-business it will listen more to the bureaucrat businessmen with their lobbying power and wealth than to the smaller, powerless entrepreneur.

Secondly, there’s a distinction between being business and markets. Business is about concentrating power at the top of a hierarchy. Markets are about dispersing power. Business thinks high profits are a good thing, but supporters of markets worry that they are instead a sign of a market imperfection or monopoly power.

This distinction means that, in some respects, pro-business policies are very different from pro-market ones:

- A pro-business government gives tax breaks and subsidies for favoured activities. A pro-market government wants a wide tax base with low tax rates.

- A pro-business government favours copyright and  patent laws which protect incumbent firms. A pro-market government wants weaker IP laws to encourage new firms.

- A pro-business government will be relaxed about red tape that strangles small firms and thus entrenches incumbents’ position. A pro-market government will not be.

- A pro-business government is happy with planning laws that protect incumbents from new entrants. A pro-market government is not.

- A pro-business government will look to give boondoggles and favours to “good” business (such as manufacturers). A pro-market government prefers a level playing field.

- A pro-business government might encourage or at least tolerate mergers. A pro-market government would worry more about the accumulation of monopoly power.

- A pro-business government will be relaxed about wasteful spending on procurement and infrastructure. A pro-market government will want less spending.

In these senses, to be pro-business is to be anti-market.

And - I’d add - it is to be wrong. New Labour’s (misguided) pro-business stance gave us the managerialism which alienated public sector workers, wasteful PFI projects, IT and military procurement policies which were mere corporate welfare, and targets which often distorted the provision of health and education. In doing all this, Labour failed to see that what makes business efficient - insofar as it is at all - is the discipline of market forces, not the skill of “business leaders.”

I would much prefer that Labour were pro-market - albeit in a more intelligent, evidence-based way than is associated with right libertarians. Sadly, this is even less likely to happen than it becoming pro-business.

Comments

[DrBlighty]

This is an excellent article. I couldn't agree with it more!

[Alex Marsh]

You identify an absolutely fundamental distinction - and one that 'business' has every incentive to try to elide. You've no doubt read it, but Colin Crouch's book "The strange non-death of neoliberalism" has plenty to say about the way in which policy (rhetoric) exclusively focuses attention on 'the market' when in fact it furthers the interests of 'business'. Frank's "Pity the Billionaires" does something very similar in explaining the rise of the unhinged Republican right in the US.

[Agog]

"Markets are about dispersing power."

No they aren't. Democracy is about dispersing power. Market outcomes are weighted by how much power you had to start with. So by pure 'market' mechanisms power is routinely *concentrated*.

I understand the distinction you're making in this post and that my objection is not relevant to your main point, but still I'd like to see the parties of the left become a lot less pro-market than they have been in recent decades.

[alastair harris]

Your definitions are somewhat suspect, as is much of your analysis, but the point about labour and managerialism is well made, although it has bog all to do with "pro-business" but rather a lot to do with a misreading of Marx.

[gastro george]

You're also missing the difference between business - as in a real business that provides real products and services - and financialisation. Real business in the UK is routinely being destroyed (and has been for decades) by financial manipulation and short-termism.

[rosscoe]

Couldn't agree more, though its not just the left that should embrace this agenda- the Conservatives often talk the talk but in practice often end up producing policies that are likewise aimed at supporting business rather than markets.

[Dipper]

being pro-worker would be a start

[human mathematics]

You're right in those cases. But there are important ways in which pro-market can be worse than pro-business.

To be pro-market is to favour an economic theory. To be pro-business is to favour measurable, demonstrable activity by people who live in the actual world.

An economist might worry about big pharma, reasoning abstractly about bundling and tying. Somebody in the drugs business might know quite a bit more about the specifics of their OTC medicines and the real business environment (as opposed to utility functions unhinged from space and time).

[gastro george]

So when Ossie complains about "anti-business" culture, then what form of business do you think he is referring to? Because he seems rather preoccupied with the City rather than real business.

[Paolo]

@ human mathematics - what are you talking about? Have you ever read a decision document from the Competition Commission or the Office of Fair Trading? Regarding big-pharma, did you read the OFT decision regarding Gaviscon? Just give us a break, would you? Those who talk abstract nonsense are more often then not rent seekers trying to salvage their position of power.

[Nofulelike...]

Spot on. I've worked closely with a range of businesses over 40-odd years, and been left-leaning even longer. It infuriates me that the Labour leadership and senior echelons obviously don't have a clue about business, not the slightest inkling - yet are happy to chunter on about it as if they knew what they were talking about. And as Gastro George points out above, the City-fixated (and largely City-financed) Tories are no better when it comes to 'real world' business. If Labour are to become an effective opposition (let alone a putative government), they need to get some real expertise, understanding and knowledge on board. Get Vince Cable to jump ship, he's ready for it. Oh, and ditch Milliband and his ilk, pronto.

[Guano]

Yes, but ............

A pro-market approach should recognise that there are limits to markets. It should recognise that you cannot turn public services into market-based institutions because trying to introduce competition is more costly than any possible benefit. And it should recognise that much of what are financial sector does has nothing to do with markets. Although "the markets" has come to mean "the financial markets" these are not markets as envisaged by Adam Smith: they do nothing to get proces right.

[Rob Marchant]

Very good points, Chris, you have identified an important distinction which my piece did not, with which I rather agree. My own preference is very much towards encouraging entrepreneurship, it's not as if big business needs much help from government, most of the time.

However, my observation would be that this distinction is entirely compatible with my piece - we do not need to give markets, or indeed business, help or favours where they're not required.

My piece was on a much blunter distinction: within Labour, business is often such an alien concept even to those at the top, that it all gets lumped together anyway. What we need to do as a first step is to ensure that we are engaging with it and not seeing it as somehow evil. We can then enter into the finer distinctions between small and big business, and between business and markets.

At the moment we are not even getting to first base, because we are failing to engage with either small or big business, as we are failing to engage with both business and markets.