IPPR Prosperity and Justice – A plan for the new economy
Here is one of the most far sighted, imaginative and practical set of proposals for the future of the British economy. It stands beside the similar excellent proposals of the Will Hutton and Andrew Adonis book Saving Britain – How We Must Change to Prosper in Europe https://guardianbookshop.com/saving-britain.html .
Prosperity and Justice argues that the economy is not working for millions of people and needs fundamental reform.
It is the product of a two-year enquiry into the UK economy, the final report of the IPPR Commission on Economic Justice https://www.ippr.org/research/publications/prosperity-and-justice-executive-summary presents a plan for economic reform to achieve prosperity and justice together. The members of the commission were drawn from a wide range of interests including business leaders, entrepreneurs, scientists, people in the cultural world and the General Secretary of the TUC. It sets out to remedy the failure to address the urgent need, after some fifty years of decline, for an industrial revolution benefitting the UK as a whole.
It is notable that it is being taken seriously by John McDonnell, Shadow Chancellor of the Exchequer.
My only criticism of both is that there is insufficient emphasis on the need to prosper by greening our economy, focus on the wellbeing of all life and living lightly on the planet if humanity is to survive.
These are the key messages.
- The UK economy is not working. It is no longer delivering rising living standards for a majority of the population. Average earnings have stagnated for more than a decade – even while economic growth has occurred. Too many people are in insecure jobs; young people are set to be poorer than their parents; the nations and regions of the UK are diverging further. As more and more people feel economically disenfranchised, the political consequences are being felt across society.
- The economy needs fundamental reform. Many of the causes of the UK’s poor economic performance – particularly its weaknesses in productivity, investment and trade – go back 30 years or more. They will not be addressed by incremental change or trying to ‘muddle through’. Fundamental reform has happened twice before in the last century following periods of crisis – with the Attlee government’s Keynesian reforms in the 1940s and the Thatcher government’s free market reforms in the 1980s. Ten years after the financial crash, change of this magnitude is needed again.
- A fair economy is a strong economy. It used to be thought that prosperity and economic justice were in conflict; we had to choose one or other but could not have both. The international evidence now points in precisely the opposite direction. A more equal economy generates stronger and more stable growth, lower social costs and greater wellbeing. Both economics and morality argue for an economy which achieves prosperity and justice together.
- Economic justice needs to be ‘hard-wired’ into the way the economy works. It is not sufficient to seek to redress injustices and inequalities simply by redistribution through the tax and benefit system. They need to be tackled at source, in the structures of the economy in which they arise. These include the labour market and wage bargaining, the ownership of capital and wealth, the governance of firms, the operation of the financial system and the rules that govern markets. Economic justice cannot be an afterthought; it must be built in to the economy.
- Achieving prosperity and justice together requires a comprehensive and integrated programme of reform across the economy. There is no ‘silver bullet’. Our 10-part plan includes far-reaching but achievable measures to:
- promote ‘investment-led growth’ by raising public investment, holding down house price inflation and reducing the incentives that currently favour short-term shareholder returns over long-term productive investment
- rebalance the economy through ‘new industrialisation’, away from an over-dependence on the finance sector towards a more diverse array of manufacturing and other innovative, export-oriented industries, located right across the country
- give workers greater bargaining power, making it easier for trade unions to negotiate on their behalf to achieve higher productivity and to share its rewards fairly through better wages and conditions and reduced working time
- pursue ‘managed automation’, accelerating the adoption of new technologies across the economy and ensuring that workers share in the productivity gains and re helped to retrain
- promote open markets which reduce the near-monopoly power of dominant companies, particularly in the digital economy, and make data available to promote innovation for social good
- spread wealth more widely in society, both by widening ownership of capital and through fairer forms of wealth and corporate taxation.
- Achieving change means redressing imbalances of economic power: from corporate management towards workers and trade unions, from dominant companies towards innovators and entrepreneurs, from short-term finance towards long-term investors, from Whitehall towards the nations and regions of the UK. We need a more active and purposeful state, acting to achieve prosperity, justice and environmental sustainability on behalf of society as a whole. It must be decentralised, with stronger powers for the nations and regions of the UK. Managing economic change will require greater social partnership, both within companies, and between businesses, trade unions, government and civil society.
7. Change is possible, and urgent. Many other countries have economies that are both fairer and more successful than ours. As we confront the challenges of Brexit, of further globalisation, and of technological, demographic and environmental change, doing nothing won’t keep things the same—it will make things worse. The economy we have is a matter of choice, and changing it is a matter of democracy. Fundamental reform can be achieved, if we have the will to do so.