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Home Opinion Small is powerful: The search for economic equality in a world without big institutional allies
Redistribution • Economics

Small is powerful: The search for economic equality in a world without big institutional allies

Adam Lent - 26 November 2015

How can progressives create more equal economies without the support of the redistributive or planning state and benevolent corporations?

If there is any core, relatively consistent goal for the many varieties of socialism that have emerged over the last century and a half, it is surely the desire to achieve greater economic equality. For a large portion of that period, socialists have regarded the state, in particular and, to a lesser extent, large corporations, as their strongest allies in delivering that goal.

The state as an ally of equality reached its apotheosis in the postwar period in the UK. First, in the period roughly from 1945 to 1979 as an economic planner guaranteeing full employment and as a provider of decent public services and a social security safety net. And then in the period running from approximately 1965 to the present day as an increasingly generous funder of a redistributive welfare system and expanding public services.

The relationship between socialism and large corporations was always more ambivalent, but for at least three decades after the war a social contract was maintained, in which nationalised and private sector management worked closely with trade unions to provide decent pay to workers, alongside a range of generous terms and conditions such as defined benefit pension schemes and healthy redundancy packages. For the unions, this relationship with large employers not only guaranteed a steady and sometimes very lucrative flow of membership dues but also ensured that the social contract’s coverage of the workforce was wide.

The extent to which this alliance with the state and corporations genuinely delivered economic equality is an interesting question. Mainstream opinion on the left is clear that the big state and trade union activism within big firms created the conditions for a much more equal economy. The historian, Peter Lindert, is far more sceptical, arguing that labour market conditions and technological change were delivering a shrinking of salary differentials long before socialists and social democrats got their hands on the levers of the state or unions became accepted corporate partners. Thomas Piketty sees shrinking inequality resulting from the weak return on investment during the last century which damaged the sources of income usually enjoyed by the well-off.

State and corporations: under attack on two fronts

Of more immediate concern is whether the state and corporations are still reliable allies on the road to economic equality. The signs are far from good. The socialist hope of finding support from its two historical friends is under assault on two fronts.

Firstly and most well-known is the way both governments and corporations gave up on the postwar settlement with the rise of the New Right. The idea of economic planning was junked long ago (and has not enjoyed the meaningful revival some hoped for after the 2008 crash). And corporations have ditched many of the postwar employee benefits along with close union partnership at the same time as they have sought out cheap overseas labour. The nationalised industry is, of course, a thing of the past even, it would seem, in the socialised world of banking. The two elements of the socialist-state partnership that still survive – namely social security and public service provision – have grown substantially in the last 50 years but not through any desire to promote economic equality but rather as a result of an ageing population demanding ever more of the healthcare system and the state pension.

But, more recently, the allies have been under attack on another front: their dwindling power and stability.

Moisés Naím in his recent book The End of Power argues convincingly that large, concentrated state and corporate power has been severely weakened. He cites three revolutions which make it far harder for the hierarchical models that sit behind those structures to get their way. The ‘more revolution’ is the rapid growth in the range of organisations, activities, identities, lifestyles, commodities and services now available to citizens in the advanced economies and increasingly in the developing world. This makes for far more complex, fragmented and fast-moving conditions, which all too often leave governments and large private concerns looking leaden-footed and overtaken by events. The ‘mobility revolution’ is the increase in the movement of people within and between countries meaning that citizens are often literally slipping out of a state’s control but are also creating rapid disruption within nations to which governments are unable to respond. Finally, there is the ‘mentality revolution’ which means burgeoning numbers across the globe are seeking self-expression and self-determination free of the strictures of the state or corporate hierarchies.

It is the last of these which is the most powerful, important and causal. As the extraordinarily rigorous longitudinal work of Ronald Inglehart and the World Values Survey has shown, the popular desire for self-determination and self-expression free of hierarchy and orthodoxy has not only grown with each new generation since the 1960s but seems to have the rigidity of an iron law. As economies get wealthier, their members move from a focus on a basic desire for sustenance and shelter to those ‘emancipatory’ values.

This profound trend has inevitably had an impact on public attitudes to the state. The Role of Government Survey, for example, has found a consistent drift away from the old social democratic vision of government in the UK.

Support for providing healthcare for the sick and support for the elderly has declined but still remains popular but in the areas of economic planning and employment popular faith in the state’s role has collapsed. In 1985, 54 per cent thought the state should help industry to grow, 48 per cent to reduce income differences between rich and poor, 38 per cent to provide jobs for everyone who wants one and 45 per cent to provide a decent standard of living for the unemployed. The equivalent figures for 2006 were 29 per cent, 27 per cent, 17 per cent and 11 per cent.

Similar, if not quite as significant, shifts in public attitudes can be seen in other European countries studied for the Role of Government Survey.

This, far more than the ‘neoliberal’ plotting that populates so much left-leaning commentary, explains why the social contract declined: the old state and corporate hierarchies could no longer offer ever-larger numbers of people what they wanted out of life. More importantly it also explains why a strategy for economic equality that relies too heavily on ambitious programmes driven by institutions with waning appeal and hence waning authority and power is defunct.

Those who desire greater economic equality need to come to terms with a world that is better characterised as ‘small’ than ‘big’. Our societies, cultures, politics and economies cluster less and less around a handful of big institutional poles based on hierarchy and established authority and more and more around a multiplicity of small, often informal networks based on self-determination and self-expression.

The key question for progressives

The one question socialists, social democrats and progressives should therefore be constantly asking themselves is: how do we create more equal economies without the support of the redistributive or planning state and benevolent corporations?

To date the question is not asked nearly often nor clearly enough. As a result, the answers that are given are half-hearted and confused: a bit more employee ownership, the living wage, predistribution of some sort and the last refuge of the progressive: better education and training.

The beginnings of a better answer may lie in understanding what Moisés Naím fails to acknowledge. Alongside the fragmentation of our world into smaller more self-determined, creative pieces there has been a counter-trend of increasing concentration of economic power with a resulting rise in economic inequality. Put simply, fewer people and organisations now own a larger share of the world’s assets, while a smaller number of corporations fight for supremacy in their increasingly turbulent markets.
This is a potentially very deep and dangerous contradiction. More and more people across the world seek self-determination and self-expression; technology increasingly gives them the tools to achieve this, but the resources to make that self-determination and self-expression meaningful are more under the control of the old elites and institutions than they have been for many decades.

For socialists this offers an opening to align a vision of a more equal economy with the small values and structures that have emerged over the last 40 or so years. A fairer share of wealth needs to break with the sustenance and shelter ethos of the postwar period (a theme that still overwhelmingly shapes left rhetoric) and instead become a route to resourcing the entrepreneurial, creative, expressive desires of more recent generations.

Making equality equal freedom and creativity

In practice this may mean two separate strategic shifts.

First, it means developing the networks and demands that best encapsulate that new spirit. For example, rather than looking askance at the swelling ranks of the self-employed as yet another step away from the postwar settlement, the left should be championing the way this group are seeking out meaning and creativity by breaking away from the grim hierarchies of the corporate world. Progressives should be demanding that the self-employed and the businesses they run have access to a larger slice of GDP (60 per cent plus of which is currently reserved for the state and large corporations).

Networks and campaigns should also be mobilised to demand a fairer share of capital and assets within corporate structures, with demands for more employee and consumer ownership of shares. The trade union movement, if it managed to break out of its current postwar mindset, could spearhead such demands.

Second, it means understanding the role of the state in a very different way. The state as planner died long ago. The state as provider of ever more generous social security is unsustainable. Besides, neither of these models sits well with a world shaped by values of self-determination and self-expression and where the capacity for the state to be an active, day-to-day intervener in the economy is shrinking.

Instead, the state’s role should be seen as a rule setter for an economy built around a vast multiplicity of well-capitalised and well-incentivised small initiatives, innovations and enterprises. That would mean, for example, reviving the old tradition of anti-trust legislation that was once so powerful in the USA until it was seriously weakened by Richard Nixon and Ronald Reagan. It could involve shifting the tax burden away from income, trade and jobs and onto large concentrations of assets. Maybe, most importantly, it would require a radical loosening of planning regulation (as well as focusing the anti-trust lens on land ownership) to create a much wider availability of the asset that maybe more than any other encouraged greater equality of wealth and opportunity in the 20th century: home ownership.Undoubtedly controversial as these ideas are, none of them requires a return to the large-scale, expensive state intervention so beloved of many on the left. They require instead the state to make meaningful changes to the rules that govern the way wealth is distributed, the better to resource and incentivise the economic and other activities of citizens seeking out self-determination and self-expression.

Adam Lent is European Director of Research and Innovation for Ashoka. He was formerly head of economics at the Trades Union Congress and director of the Action and Research Centre at the RSA. He is the author of the forthcoming book: Small is Powerful: Why the Era of Big Business, Big Government and Big Culture is Over. He writes in a personal capacity.

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