A key political battleground now exists around the issue of creating a fairer system of capitalism. Ed Miliband initiated this agenda and now both David Cameron and Nick Clegg have said they want a move away from ‘crony capitalism’ to ‘responsible capitalism’.
However, at the first opportunity – on boardroom pay – the Government failed to take the required action (introduce worker representation at board level). What we need some strong ideas to make capitalism fairer – and here are five that can achieve this:
1) Equality in educational opportunity
Capitalists often pride themselves on their belief in ‘equality of opportunity’. Yet from almost birth, many children are at a huge advantage – through education at private schools. To put this into perspective, 32% of teenagers at private schools gained three A/A*s at A Level last year, compared to just 8% in the public sector.
There should be an immediate end to the current system of tax breaks worth £88m per year and tax-deductible donations to independent schools.
Further down the line, a review should be held looking into the viability of preventing schools from charging fees and selecting pupils. Instead, a lottery style application process for places could be considered as an alternative approach.
2) Fairness over worker pay
Workers currently face a squeeze on their incomes; whilst those at the top have seen their salaries rise at a much quicker rate. The Spirit Level, by Wilkinson and Pickett, showed that countries with the most unequal pay ratios – are also the ones with the most societal problems, such as poorer health and lower educational attainment.
To change this, consideration should be given to the idea of having an earnings structure in companies which ensures the lowest paid earn as a minimum a certain percentage of the highest – perhaps 10 per cent. So theoretically, if the highest earner took home £200,000 per year, the lowest paid would have to receive a minimum of £20,000.
3) Taxation on wealth
The hoarding of private property is perhaps the most historic example of ‘crony capitalism’. It is reported that just 0.6 per cent of the population own 50 per cent of all rural land. Indeed, a core of just 1,200 ‘aristocrats’ own 20 million acres of the land in Britain (out of a total of just 60 million).
In order to change this, the Mansion Tax should be immediately implemented, whilst a Royal Commission should be introduced to consider the viability of a land-value-tax. Andy Burnham spoke frequently of the latter during his Labour leadership campaign and the tax has already existed in Taiwan, Hong Kong, Estonia and Russia.
4) An end to monopolies
The existence of monopolies is an example of market failure, and indeed, is economically inefficient and socially undesirable. Capitalists should be in favour of strong competition policy to correct the imperfections of the market; unless of course they support the crude dog-eat-dog, free-for-all of an unregulated system.
The maximum fine for being guilty of illegal anti-competitive acts should be increased to subsume a substantial percentage of the worldwide revenues of offending firms. Freedom of Information rules should also be extended to private organisations that provide public services, to ensure that their practices uphold the same high standards expected of the public sector.
5) Greater employee ownership
Co-operatives and mutuals have a social conscience, their workers are usually happier, productivity is often better than in private companies and there is greater equality in the proceeds of success. John Lewis is a prime example of this and indeed the Government has indicated that a Co-operatives Bill will be introduced in the next Queens Speech.
However, it is vital that co-operatives increase as a percentage of the private sector, rather than being used by the Government, as some suspect, as a mechanism for yet more privatisation of public services. In addition to tax breaks for new co-operatives, consideration should be given to the idea of making large companies reserve a percentage of their shares for the average worker.
Just tinkering around the edges won’t alter our existing system that maintains the status quo in which the wealthy few hold all the aces. Instead we need radical change that will put power and control in the hands of working people, resulting in capitalism for the many.