Are the super rich at the World Economic Forum in Davos “morally and intellectually bankrupt” as opined by Will Hutton in last Sunday’s Observer? He argues that many of them generate excessive profits by squeezing employees’ wages. More tenuous is his view that this lack of wealth redistribution is restricting economies that would otherwise trade out of recession if employees had more to spend.
However Mr Hutton does have a point: “Reality will out. Everyone knows by now, even in Davos, that there can be no return to the world before 2008, relying as it did on abundant supplies of cheap credit. Equally, we need our economies to grow with real, sustainable growth, as opposed to an artificially stimulated variety….. Real growth can only be achieved by the economic empowerment of ordinary men and women, by promoting individuals to become capitalists, to want to be owners who will bear the pain, and also share the spoils.”
He suggests: “It is a wonderful opportunity for enlightened business leaders, politicians, trade unions and indeed all of us to reimagine the role of people in western societies. One of the reasons it has been easy to reduce the power of people in the Anglo-Saxon world is through fear, fear of change. This has preserved the status quo and kept incumbent leaders in power.”
Those with long memories will recall the militant opposition of the British trade union movement to co-determination – that is, putting workers on company boards – in the 1970s: stupid.
Yet Britain, and the West for that matter, needs a way of relating labour to capital. We need to engage employees by encouraging ownership and sharing the benefits of their efforts. It seems an impossible ask. We need employee representatives, union negotiators and business leaders to become leaders of change. Not confrontational or militant style negotiation of change, take it or leave it, one out, all out but strategic leaders who can negotiate reward for productive effort – to argue for a share of the spoils when they are genuinely there, but acknowledge that it might involve sharing pain to get there. They should be able to cut deals and support firms when jobs are at risk, but also make sure the deals are fair for all stakeholders when the business is turned round.
Hutton argues: “One way forward is co-determination, putting employee representatives on company boards. Another would be to revisit the ideas of Nobel prize winner Professor James Meade and organise compensation so that a firm’s profits are equitably shared between workers, management and shareholders.”
Whether or not Davos is intellectually bankrupt, the ideology it champions will ultimately seek to preserve the interests of its delegates rather than promoting those of employees. Capitalism certainly requires intellectual challengers, social movements and union leaders to take risks and reimagine their role.
The best time to negotiate a good deal for workers is when their employer really does need their support, when they are in a financial crisis and need to restructure to survive.