Pro-growth, anti-business

David Clark writes:

To abandon the search for a more equitable, productive and democratic economy out of a desire to appear “pro-business” would be a serious error.

This hints at an under-appreciated possibility - that some pro-growth policies are not pro-business. What might these be?

One obvious candidate would be some combination of less austerity, a serious jobs guarantee, a citizens basic income and stronger trades union rights all of which would strengthen workers' bargaining power. These would be "anti-business" in the sense Kalecki noted: they would undermine "the social position of the boss", in part by making employment less dependent upon business confidence.

They might, however, be pro-growth not only in the sense that they increase aggregate demand but because they might encourage productivity growth. If bosses can no longer make profits by employing cheap labour, they would need to increase efficiency and deepen the capital stock. Is it really a coincidence that the strongest sustained rise in productivity we've seen in the UK occurred during the full employment of the 50s and 60s?

This, though, is by no means all. Here are five other possibilities:

 - Tougher competition policy, planning reform and less restrictive laws on intellectual property. All these would have the same effect. They'd be anti-business in the sense of weakening the power of incumbent firms, but pro-growth because they would encourage new entrants. Insofar as productivity growth comes from such external restructuring (pdf), they would also raise productivity.

 - Encourage alternative sources of finance, such as P2P lending, crowdfunding or even a state investment bank. All these are anti-business in that they are anti-banker but pro-growth because they encourage new companies.

 - Tax reform. Lower rates of corporate taxes but with fewer exemptions are against the interests of some businesses but might well be pro-growth. And I suspect that a cut in corporate tax financed by higher top rates of personal tax might highlight the distinction between the interests of business and the interests of those who run them; the two are not the same.

 - A maximum wage for quoted companies and organizations in receipt of public funds.As Michael Skapinker says, "even fervent defenders of free markets think top pay is out of control". Such a maximum could unleash a wave of entrepreneurship; it says to managers and bankers: if you want to make big money, you've got to stop being fraudsters and bureaucrats and instead set up your own business.

 - Greater worker ownership and control. This would obviously be anti-business, in the sense that it would undermine the power and self-regard of bosses. But we've good (pdf) evidence that it might well increase productivity (pdf) - perhaps for the Hayekian reason that it makes better use of fragmentary, dispersed knowledge than bosses can. We know that centrally planned economies are a bad idea - so why assume that centrally planned companies are?  

My point here is a simple one which, like pretty much any economically literate idea, is utterly disregarded by our idiot media - that there's a big difference between being pro-business and pro-markets. Remember that it was business (or a chunk thereof) that caused the financial crisis by mismanaging the banks and by failing to invest in real capital, thus encouraging money to flow into malinvestments such as dodgy mortgage derivatives. Should we really wholly entrust it with the recovery without even thinking about the alternatives?

Comments

[pablopatito]

When you say "pro-business", I think you mean "pro-big-business". I don't think the criticisms you make of bosses (their "self-regard" and "social position") are directed towards, say, the old guy who fixes my car who employs his son and a couple of apprentices. Or the young guy who develops web apps with a couple of friends out of Uni. Or the family that runs my corner shop. But these are all businesses. They're small businesses. And rightly or wrongly, they're naturally inclined towards voting Tory.

In that regard, being "pro-market" and being "pro-small-business" are much the same thing, and addressing the concerns of small business owners isn't a bad election strategy.

[Metatone]

@pablopatito

The weird thing is (as a small businessman myself) I've seen parties come and go out of government all mouthing "we're pro-small business" but virtually all of their decisions aid the big businesses instead.

I'll throw in another one - do something about the way big businesses pay small suppliers later and later. Even the Tory backed "Enterprise Nation" lot note that this is a big factor damaging startups in the UK.

It would be easy to frame something around plcs (if you're a plc, you already have the size & accounting department to account for this kind of thing.) But... nothing doing...

[Luis Enrique]

yes given all the press nonsense about Labour being anti-business I always thought Ed could have given a fiery speech about what being "pro-business" actually means for the Tory party, as opposed to what being "pro-business" ought to mean, and make the claim that Labour is pro-business in the pro-markets sense, i.e. policies to encourage businesses to deliver for everyone, not just enrich their owners.

[maybe he did. I can't say I followed all his speeches]

[Matt Moore]

Good point. Being pro-business or anti-business can be good or bad depending on the context.

I wish people would start expressing themselves as pro-market instead ( meaning the ability of people to peaceably and honestly cooperate as they see best)

Which brings me to another point of language actually. People often talk about competition, when the defining feature of the market is actually cooperation.

[Steven Clarke]

@Matt I can't remember who, but a blogger was complaining that the language of 'competition' casts a market economy in a bad light. He therefore suggested that in a market economy, firms 'compete to co-operate'. Apple is successful because it co-operates with many designers, suppliers and customers to deliver a great product. But it is competition with others that drives this co-operation. This doesn't erase the idea of competition, but parcels it in the cuddlier language of co-operation.

[Steven Clarke]

I think that a useful way to think of this is as an insider-outsider axis.

Being pro-business protects insiders; pro-growth, outsiders.

On housing, policy very much favours insiders (giving unearned gains to homeowners). Neither party seriously seeks to shift this.

Ditto on immigration, both parties are for the insiders.

On other issues, the Left doesn't always come out well. Some argue that reducing business regulation helps outsiders relative to insiders. The Tories are more comfortable talking about this. On schools, it is the Tories who have allowed outsiders to come in and set up free schools, whereas Labour often supports the teaching unions and the status quo.

In my gut, I still feel that it is the Tories who for the insiders, and Labour the outsiders; but there was little from the Labour Party in the last election to confirm this feeling.

[Dave Timoney]

A workers' cooperative is a business. A prosititute is a business. Russell Brand is a business. Noam Chomsky is a business. The point, of course, is that we interpret "business" to suit our interests. For some, pro-business means less "red tape" and fewer labour regulations. For other businesses it means the opposite - e.g. EPL footballers or Hollywood actors. One of the ideological tricks of the "business" trope is to obscure the different interests of different forms of capital.

@Metatone, the standard credit days (28 or 30) haven't changed in a century. This is despite telegraphy, telex, email, BACS, SWIFT etc, not to mention ERP and accounting systems. A change would produce winners and losers (i.e. who gets more days of earned interest), so the dominant party (the buyer - which, at an aggregate level, means big business) will not countenance change. This is not about capability but power. You probably knew that.

@Matt Moore, your claim, "the defining feature of the market is actually cooperation", only makes sense if you beieve that transactions tend to be mutually-beneficial. But this assumes that markets are essentially neutral - that they do not encode any prior advantage or systemic bias - which experience would suggest is an optimistic belief at best.