Responsible capitalism and irresponsible politicians

Another day, another attempt by Clegg to do an impression of a statesman on TV. This time, speaking on behalf of the coalition, the Rory Bremner of politics introduced a shift from one set of buzz words to another.

Words like ‘responsible capitalism’, ’employee ownership’, ‘right to request shares’ and ‘progressive taxation’ were buzzing all over the Mansion House, where the DPM gave the world the benefit of his economic wisdom, springing no doubt from his own rich experience in business. 

About time too: ‘Big Society’ lost its buzz when it turned out it was nothing but buzz. Now we have ’employee ownership’, an idea that’ll supposedly end our economic woes once the TV star has worked out all the ‘details’, which he self-admittedly hasn’t quite done yet.

One detail I’d suggest he concentrate on is how to work out this imaginary scenario. Let’s say four chaps start a company, with each owning 25 percent of the shares. Within a few years the company has thrived, it now employs 100 people, and the owners’ shares are worth a lot of money, though each still owns 25 percent. So how is Clegg going to make them transfer part of the ownership to the employees? Assuming they haven’t seen the light of their own accord? There’s only one sure way: the state moves in, confiscates a portion of the company and distributes the shares. Thus we can reduce Nick’s buzzing ‘responsible capitalism’ to one prosaic word: confiscation.

As to the ‘right to request shares’, one would think no government action is required because this right already exists. In a plc, anyone can buy shares in the open market, no special dispensation needed. And in a privately owned company, an employee can always ask the owners for shares in the business — all they can do is say no. Still, if you never ask, you never get, and perhaps this same employee is valuable enough for the owners to give (or sell) him a small part of the company. Either way, there’s no harm in asking — is this what Clegg is saying?

Probably not. What he’s still too coy to spell out is that, for the employee’s right to request shares to mean anything at all, it must be matched to the owner’s obligation to satisfy the request. So this too means confiscation.

Sure enough, Clegg is suggesting some tax incentives for owners to go along. Again, that area where the devil resides needs to have some light thrown on it. Let’s say our hypothetical four owners have 1,000 shares each. It would then be no great sacrifice for them to give each of their 100 employees a couple of meaningless shares just to qualify for the tax breaks. To think they wouldn’t resort to such a ruse is to presume too much on human goodness.

Therefore, to prevent windows from being dressed in this way, the state would have to insist that the relinquished shares represent a significant chunk of the total. In other words, the state would reserve the right to decide who owns what, effectively turning business owners into business managers first, state employees second.

That would enforce the concept so dear to Clegg’s heart: egalitarianism. He hinted at this affection by yet again using ‘redistribution’ and ‘progressive taxation’ in the positive sense. To Burke ‘compulsory equalisations’ could only mean ‘equal want, equal wretchedness, equal beggary.’ To modern egalitarians like Clegg they are the shining beacon.

‘Progressive’, which is to say redistributive, taxation highlights this by setting up a conflict between two pieties. On the one hand, redistributive taxes represent an egalitarian attempt to push high earners down to a lower level. On the other hand, they are a flagrant violation of the principle of equality before law, which is the only equality that can be mentioned in the same breath as justice.

It goes without saying that someone who earns more should pay more tax in absolute terms. But to make him pay, say, four times the proportion of his income has as much to do with justice as the Korean People’s Democratic Republic has to do with people, democracy or republicanism. So at the heart of Clegg’s affection for ‘progressive’ taxation lies the same deeply felt conviction in confiscation. Bogus equality will trump the real kind every time.

One can detect the source of Clegg’s ideas (details presumably to be worked out after the next election). In Germany employees indeed sit on remuneration committees and take a more active part in management. This goes back to Walther Rathenau’s war socialism of the First World War, a practice later embellished and incorporated by the Federal Republic. It’s debatable whether Germany’s economic successes are indeed attributable to worker participation, as opposed to the superior work ethic and education of their labour force. But the German provenance of this arrangement is indisputable, and Nick does have this uncontrollable passion for things continental.

It’s far from certain, however, that, in the absence of superior work ethic and education, employee ownership would be universally successful in Britain. Still, as the success of John Lewis, much touted by Clegg, shows, the idea isn’t without merit in some situations and for some types of business (in this instance, retail trade). But Nick, Dave, George, Vince, Danny and the rest of the gang must learn that, when it comes to companies they don’t own, there has to be an uncrossable line between a promising idea and government action. 

If you want to help the economy, gentlemen, just halve taxation and government spending, leave the EU with its stifling regulations, and let us get on with it. We’ll sort ourselves out, thank you very much. The people who make a big success of the businesses they own don’t need your help — much less your diktats — to decide how to deal with employees.

And please — please! — spare us the waffle and buzz words. Keep those for your ghost-written memoirs.


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