Michael Clanchy outlines his blueprint for a civilised capitalist system, free of extreme neoliberal inequities.
No, socialism just won’t do.
Sclerotic, centralised, top-down planning, with the means of production and exchange owned and controlled by the state; command and prescription rather than industrial devolution, flexibility and innovation.
This socialist economic model has thrived nowhere and has been far too often associated with varying degrees of totalitarian government.
Yet a crisis in capitalism
At the same time, highly aggressive forms of so-called “free market” capitalism, or neoliberalism, as practised over the last 40 years in Anglosphere nations, have been accompanied by disturbing economic, ecological and social correlations, including:
- successive boom-bust economic cycles, culminating in the deeply recessionary 2008 GFC;
- extreme levels of income and wealth inequality;
- increasing job insecurity and underemployment across the labour market;
- dangerous climate change, increased land, sea and air pollution, the depletion of non-renewal resources and the rapid destruction of habitat and biodiversity;
- parasitic and risky financialisation of the real economy;
- overall economic stagnation and weak levels of demand; and
- a widespread fall in labour income share in relation to profits within OECD countries.
As a result, leading researchers and activists are now discussing optimal economic models for the near future. There is an emerging consensus among the disinterested thinkers that the economy needs a far more “civilised” form of capitalism, operating within a framework of policy, carefully targeted regulation and values, which is acceptable to the broader society.
- encompasses efficiency, productivity and relative financial stability;
- acts against massive income and wealth disparities and ensures a basic minimum material standard of living for all; and
- pursues a “green growth” model of development to promote ecological sustainability.
What would a civilised capitalism system look like and what are the critical priorities and changes needed to rectify the current crisis in capitalism?
Economics professor Joseph Stiglitz likes to refer to this reform agenda as “re-writing the market rules” of the rich and politically powerful, while Robert Reich, a former senior U.S. administration official, calls it “saving capitalism for the many, not the few”.
Priorities at a glance
Some of the top priorities for reform identified by the abovementioned writers include:
Transition to a green model of economic growth — predicated upon human need across the population base.
A green model of economic growth would require accountability to the triple bottom line — economic, ecological and social. Technological and environmental activity would need to meet sustainability standards. Reduction in economic inequality would be targeted as would the alleviation of poverty at the lowest socio-economic levels.
Establish a supra-national level of agreements and governance to manage globally interconnected problems and risks.
As the world becomes progressively smaller with modern transport and communications, many problems and risks no longer recognise national borders. Agreements and governance arrangements at the supra-national level are required to manage systemic global issues such as environmental risk, international tax evasion and avoidance, fair (not necessarily free) trade and destabilising rapid flows of capital and exchange rate shocks.
Protect and strengthen labour rights and conditions.
Successful neoliberal attacks on job security and working conditions would need to be reversed through stronger labour market regulation. Minimum pay rates, growing labour income share proportional to GDP and adequate levels of income support for those unable find work are required. Wage protection would support consumption and thus a higher level of demand to fight the current economic stagnation in many countries.
Changes to corporate governance practice should also be pursued so that the interests of shareholders no longer obliterate consideration of the interests of other corporate stakeholders- workers, customers, suppliers and local communities.
Ensure robust public investment in national development priorities.
Robust public investment by the state is essential for national development and longer-term prosperity, especially in the areas of physical infrastructure, education and training, research and technology development, health and early childhood development. Reluctance to invest in these areas is highly counterproductive.
Rebalance and bring integrity to the tax revenue base.
Urgent attention must be paid to protecting public revenue streams from tax evasion and avoidance, and tax concessional welfare to the super-rich and big business must be curtailed.
Rebalancing tax collections to place a greater focus on capital would relieve the current burden on genuine income-earners.
Repurpose, restructure and decrease risk in the workings of the finance industry.
The powerful finance industry requires radical restructure and regulation to become fit for purpose and lessen risk, especially for ordinary taxpayers who tend to shoulder financial burden after bank meltdowns.
Within the banking industry, a clear structural separation between savings banks and investment/hedge funds is crucial. Shadow banking entities must also be outed. In relation to banks, macro-prudential regulators must actively supervise capital reserves, loan valuation ratios and high-risk investment product categories.
Finally, government and government agencies in charge of monetary and fiscal policy also need to be vigilant and ready to act against pro-cyclical excesses which can lead to destructive boom-bust events.
Over the medium to longer-term, economies do not remain stable and balanced but need judicious intervention.
I am confident that many IA readers have their own particular gripes and preferred reforms to the current mode of “indecent capitalism”. I will read your views in the comments section with interest.
Michael Clanchy is a management and policy development consultant and has authored books including Good Bosses, Bad Bosses: Surviving at Work. Publishers of his feature articles include BRW, The Age, The Brisbane Courier Mail and The West Australian.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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