What does “the good economy” look like?

The UK’s Compass Institute, loosely tied to the Labour Party, has issued its second of three big picture think pieces. The first, The Good Society, was highlighted on RPE last Fall. The second is called A New Political Economy. It is a thick document full of good ideas, most of which are relevant beyond the UK.

From the introduction, The Good Economy:

We can only judge if we are going in the right direction if we have an idea of where we are trying to get to. What is the economy for? Too often the economy (narrowly defined) is wrongly assumed to be an end in itself. The good economy should advance the good life and help us to create a good society. It is not merely a means to pay for these things – a good economy should itself embody and actualise our values of social justice, quality of life, mutual responsibilities, democratic accountability and environmental sustainability.

The good economy provides for public goods as well as private consumption. Generating tax revenues to pay for excellent public services is a leading purpose and benefit of prosperity, not a drag to be minimised and apologised for. The good economy promotes social justice. Inequality and poverty are redressed through progressive taxation to fund redistributive benefits and services, which are universal and free at the point of use unless there are compelling reasons otherwise. Women, minorities and disadvantaged groups are treated equally and people are fairly treated in the marketplace.

The good economy is a caring economy. It provides living wages, secure pensions and affordable housing for all. It supports a progressive shortening of working hours, with productivity gains taken as time as well as income, as happened through much of the twentieth century but has stalled since the 1980s. It offers everyone the opportunity to enjoy the fulfilments of both work and caring, rather than having too much of one or the other. It supports the household, care and voluntary economies.

The good economy is a democratised and accountable economy. It promotes good working conditions, democratic workplaces, more work time flexibility and more employee control over work. It contains responsible corporations held to account through legal and fiduciary duties and frameworks. It has a more collectivist framework for decisions, not a purely market choice driven approach. It is embedded in a social Europe and international governance mechanisms, and helps promote sustainability, pro-poor development and democracy worldwide.

The good economy is environmentally sustainable. Tax and pricing structures make conserving energy and resources profitable, and waste costly. Smart regulation prevents damage before it happens, rather than trying to clean it up afterwards, and creates opportunities for green businesses.

The good economy outperforms the deregulated ‘feral’ economy in traditional economic terms. By preventing businesses from causing social and environmental damage, it removes the need for expensive remedial programmes, allowing better use of public resources while still improving the public realm. Public interest decisions improve the long-term viability of businesses and their resilience to trade and environmental shocks. Contented and secure workers bring more to their work, are better able to meet its challenges, and more ready to be innovative and enterprising.

But the good economy measures its success not primarily in terms of monetary growth, commercial competitiveness, or narrow efficiency, but in terms of human well-being, longer-term resilience and security, and environmental sustainability. It is one in which people want to live and work, and where companies invest with confidence.

From those principles and values, the summary lists what these ideas mean in policy terms:

Present policy focuses upon deregulating capitalism and then picking up the pieces afterwards. This is a vastly inefficient way of doing things. Instead the economy needs to be designed to promote quality of life, social justice and environmental sustainability as primary goals. Building on the proposals in The Good Society to promote equality, this book puts forward a series of policy proposals to help manage capitalism and put the UK economy onto a ‘high road’ to prosperity.

At the individual level this includes:
• Better employment protection through a living wage and better working conditions
• More access to training and skills, including a legal right to time off for training for unskilled workers
• Better paid parental leave
• More support for caring responsibilities through a better care workforce
• A work life balance and ability to both work and care for others through a maximum 48 hour working week and an extension of the right to request flexible working to all
• Measures to promote green homes not just on new build but also on existing homes which constitute 99 per cent of housing
• Access to ‘smart tariffs’ for energy which give access to low price energy up to a certain basic level (dealing with fuel poverty) but then charging higher rates for extra consumption

At the corporate level this includes:
• A focus on quality of working life including giving employees greater control over their workplace
• Greater duties for corporations to take all stakeholders (rather than just shareholders) into account when making decisions
• Higher levels of company transparency, especially when operating in the public realm, such as when taking part in PFI schemes
• Recognition of the needs of all corporate actors such as small businesses, the voluntary sector and social enterprises rather than a pure focus on the needs of big business
• Greater shareholder activism and legal action to prevent boardroom failures receiving fat cat salaries At the market level this includes:
• Greater use of smart regulation to promote innovation and to build quality markets that work in the public interest
• Universal service obligations to protect the weakest – e.g. to provide ATMS in poor areas
• Greater environmental regulation to help make the socially conscious choice an easy choice for consumers – e.g. to not put stand by switches on electronic items
• Better competition policy to prevent large scale monopolies
• Measures to reduce investor short-termism
• The use of public sector procurement to achieve social and environmental aims

At the UK level this includes:
• Raising taxation levels over time towards Scandinavian levels to fund better public services and mitigate the inequality caused by globalisation
• Reform of the fiscal framework to switch the overall tax burden from hitting the poorest hardest to being progressive, and to move towards greater environmental taxation including carbon taxes.
• An annual tax on wealth to deal with the UK’s shocking inequality of life chances
• Industrial policy measures including support for environmental industries through a decentralised energy system using Combined Heat and Power stations, renewables and clean coal, to make sure the UK has a share in this world market
• Rebalancing economic activity from the South East to other regions, and in turn easing pressures on the housing market
• A national Standing Commission on the Quality of Working Life
• Better transport infrastructure aimed at giving job seekers greater mobility, and at making cities more environmentally sustainable through congestion charging
• A land value tax to reduce housing market booms and busts, and to help fund infrastructure such as low carbon transport
• New measures of well-being, social justice and environmental sustainability to help promote good quality economic activity At the European level this includes:
• Greater commitment to working at the European level to shape globalisation
• More expansionary European economic policies including a European Recovery Fund
• Strengthened European social and environmental regulations
• A new funding stream to achieve the Millennium Development goals, such as a levy on international air travel
• Reform of foreign aid to get rid of so called ‘phantom aid’ which does not benefit recipients

At the global level this includes:
• Allowing poorer countries to follow their own economic policies rather than being forced to follow neo-liberal orthodoxy through IMF and World Bank strictures
• Using trade sanctions against countries that do not participate in international agreements about climate change
• Rolling back intellectual property laws to promote greater innovation
• Enabling countries to introduce capital controls both as a revenue raising measure and to protect their economies against instability
• A new global reserves system and international clearing union on the basis of Keynes’s proposals over sixty years ago
• Making multinational codes of conduct more enforceable, and introducing transparency to their lobbying activities
• A global cap on carbon emissions and a global carbon trading scheme
• Measures to reduce global oil dependence These measures would help to create a managed capitalism that will outperform the present deregulated system that we have, leading to prosperity, quality of life and a more equal, sustainable society.