Vince Cable, Stephen Kinnock and Andrew Cooper: Restoring trust in capitalism means moving beyond ideology
Capitalism has been a controversial word since the start of the industrial revolution. Yet despite the historic clash between capital and labour, few would take issue with the fact that industrial capitalism has led to the greatest sustained improvement in wellbeing and prosperity in human history. It appeared to be the gift that kept on giving as living standards seemed set to rise inexorably.
But now, for the first time since the early twentieth century, the next generation looks set to end up poorer than their parents. Moreover, the UK has fallen further behind other countries on productivity, resulting in stagnant wage growth. As a consequence, large sections of our society no longer feel they are benefiting from the way in which the economy functions.
The findings from new, exclusive polling conducted by Populus for the Centre for Progressive Capitalism are stark. Almost three quarters of respondents said the UK’s economic system is effective at providing opportunities for people from wealthy backgrounds to achieve their aspirations. However, only 5 per cent think that the UK’s economic system is effective at providing opportunities for people from poor backgrounds to achieve their aspirations. And only 11 per cent said that the economic system helps people from all walks of life.
The view that our economy is skewed to support those from wealthier backgrounds is also reflected in people feeling let down by both governments and business on the issues that matter most. Many struggle to find decent, affordable housing; to retrain in order to take up new jobs; or have confidence that companies are well-run for the long term. And they want practical answers rather than political point-scoring. The Populus polling highlighted that the major barrier for the younger generation to achieve their aspirations in life is the shortage of housing, closely followed by the lack of skills and job opportunities.
But just one in ten said they thought government does a great deal to help people from all walks of life to achieve their aspirations. Trust in business was only marginally better, with 16 per cent saying they thought big business helps people from all walks of life to achieve their goals. However, there was a strong belief that our universities and apprenticeships are able to deliver the tangible tools to meet people’s ambitions. This leaves the traditional political debate between politicians on the left and right about the role of markets and government looking ever more irrelevant.
Take housing. Spiralling prices and rents are sucking money away from households, as well as away from productive investment. But the answer does not lie simply in less government intervention, nor simply in more redistribution. Government is inextricably linked to the way the market functions and so is part of the answer. The same goes for the low levels of trust in business. Solutions are going to be found through partnerships of committed stakeholders rather than a binary approach which looks to either self-regulation or primary legislation.
Two thirds of people who work in the private sector believe that firms focus too much on short-term financial results. Although the financial results of firms are clearly important to the sustainability of our economy, companies are also where a large percentage of the population spend most of their lives. Work is therefore a route to personal fulfilment, as well as financial security, which is why workers increasingly want to see their employers taking a greater interest in society.
Companies are generally much more successful if their employees are happy, fulfilled and challenged. Indeed, these characteristics can be far more important to increasing productivity growth than increasing capital expenditure to on-board new technology. Given the UK’s poor productivity level, this may be a crucial area of focus if wages are to grow again across the board.
That’s why we welcome the launch of the Centre for Progressive Capitalism as a much-needed initiative that aims to look at some of the underlying systemic issues across our economic system beyond traditional political divisions and out-dated ideological labels.
Firms need access to capital and reasonably priced office space, and to employ workers with the necessary skills who have access to housing. This needs to be combined with a long-term innovation and industrial strategy. Lastly, the governance arrangements of firms need to be realigned for the long term. These are big issues and the Centre has a big job ahead of it, but we look forward to a dynamic dialogue under its auspices.
Vince Cable was secretary of state for business, innovation and skills between 2010 and 2015.
Andrew Cooper is the former director of strategy to the Prime Minister and co-founder of Populus.
Stephen Kinnock MP is PPS to Angela Eagle and chair of the PLP Labour Business Group.
All three participated in the Centre for Progressive Capitalism launch event kindly hosted by the ICAEW.