Everyone seems to be reading “The Establishment And how they get away with it” by Owen Jones! It is a popular book about political economy! I’ve seen people reading it in coffee shops and on public transport many times.
Perhaps it’s an easy read because its insights are shocking. Sensationalism always sells. But it lifts the veil from what is really going on and everyone should take an interest. Like the proverbial frog in water slowly increasing in temperature, we have been hardly aware of the steady erosion of the post-war economic consensus. I can remember my father telling me in the sixties that there was no need to worry about money because the state would always take care of us. I’m afraid he was wrong. The benefits his generation fought for can no longer be taken for granted, according to Jones.
The Local Economy
I’m interested in the implications for local economies. First, this is not about being pro or anti-business. I’ve read a lot about the Labour Party’s performance during the last General Election. The consensus seems to be that Labour is pro small businesses that are just starting out at their own risk but against successful businesses, they labelled as predators.
This article about Mary Creagh is typical of the criticisms Labour has received, primarily from its own members. The Guardian quotes her, saying when she withdrew from the Leadership contest, “Labour cannot be the party of working people and then disapprove when some working people do very well for themselves and create new businesses, jobs and wealth.”
I don’t know whether this is fair criticism of Labour but it displays a common misapprehension about business. The issue has nothing to do with the size or success of businesses. The issue is whether businesses are local; which means they make a net contribution to the local economy.
I deliberately leave the term “local business” open. It could mean your neighbourhood, city or region. It could even apply to a business with national reach. The key issue is what it does with its profits. Negatively, this means it does not avoid tax and salt its takings in off-shore bank accounts. Positively, it pays its workers a living wage, pays its taxes and invests in the economy.
How Local Business is Undermined by the Establishment
This is the underlying argument in “The Establishment”. The interests of local businesses and large corporations are opposed. Attempts to regulate the predators benefit local businesses, or should do. Jones writes on page 225:
“Tax avoidance also hammers local, smaller businesses. The owners of, say, a modest independent coffee shop cannot hire an army of accountants to exploit loopholes in the law, or import costs from foreign subsidiaries to offset against tax, or dump profits in tax havens. They simply have to pay the tax that is expected of them. And by doing so, they are at a competitive disadvantage to multinational companies who exploit the law.”
Jones emphasises small businesses here but I imagine some fairly substantial businesses suffer the same competitive disadvantages. The reality is most local businesses are not that bothered by high taxes for high earners because they would welcome an opportunity to pay such taxes!
Jones asks why it is government and just about everyone else invests heavily in businesses that do little to benefit the country and fail to support small business people. It was ever thus. I can remember my father who ran his own business from the 1950s, complaining in the 1980s that it doesn’t matter which party is in power, they all ignore the needs of small businesses. The establishment seems mesmerised by huge corporations that exist solely to exploit the countries in which they happen to be based.
What would it be like to live in a society where the establishment truly valued local businesses?
