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Democratic Wealth

Private households in the UK own an estimated £10.3 trillion in property and other assets, most of which is relatively lightly taxed. Following the 2008 financial crash, the need to find additional public resources to reduce or obviate the need for painful spending cuts and fund growing long-term demand for public services makes wealth an attractive potential tax base. However, while it is generally accepted that the current system of property and wealth taxation in the UK is highly flawed, there is no broad political consensus on whether and how different forms of wealth should be taxed. There is also a lack of evidence about the potential impact of different approaches.

“What kind of economy is consistent with living inside a living being?” This was a question posed under a leafy canopy, deep in the woods of southern England, not far from Schumacher College where I’d come as a teacher. I stood listening with a group of students as resident ecologist Stephan Harding asked what for me would become a pivotal question – the only question there is, really, as we negotiate the turn from the industrial age into a new age of civilization. I’d come to Schumacher to share my learnings from four years as cofounder ofCorporation 20/20 at Tellus Institute in Boston, where I’d helped lead hundreds of experts in business, law, government, labor, and civil society to explore a critical question: How could corporations be redesigned to incorporate social and ecological aims as deeply as financial aims? Over 20 years as co-founder and publisher of Business Ethics magazine, I’d seen how corporations and financial markets had come to be the dominant institutions of society, how their profit-maximizing operating system had become the operating system of the planet. That design lay at the root of many major ills facing our society. But Stephan’s talk helped me understand why redesigning corporations did not quite hit the mark as the solution: You don’t start with the corporation and ask how to redesign it. You start with life, with human life and the life of the planet, and ask, how do we generate the conditions for life’s flourishing?

There is no such thing as “the market economy”. Markets come in many varieties and their character is a matter of political choice. Saying that a market is politically shaped is simply to state the obvious, namely that any economic market is first political and then economic. A politics-free market does not exist in the real world outside of standard economics text-books or, paradoxically perhaps, in the prevarication of politicians who deny its political component precisely for political reasons. So, if markets are irreducibly political, we need to ask what values should guide their political construction. The Democratic Wealth series has given much attention to ‘republicanism’ as a philosophical tradition which might serve as a source of guidance (see, for example, these contributions from Alex Gourevitch, José Luis Martí and Philip Pettit). But which republicanism?

A republican economy should aim at maximising the genuine independence of economic actors. Only then can corruption be tackled at the root. In part this essay is a response to Stuart White’s call in his introduction to the Democratic Wealth series to challenge the relevance of republican ideas for thinking about how to build a citizens’ economy. I will first point to a significant potential weakness in contemporary republican political theory. There is a danger in the republican view of non-domination, namely the failure to recognise in relation to a republican economic order that it is necessarily an order of power. In one sense this view is perfectly consistent with the version of republicanism that has been proposed in recent times by Philip Pettit and Quentin Skinner, in so far as they licence interference by the state as a means of preventing non-domination. But, as emphasis is often important, there is a need to focus on the other side of the republican equation of freedom – the minimisation of dominance entails the maximisation of independence. How can this goal of the maximisation of the independence of economic actors be squared with the idea of governed economy where the conduct of those actors is subject to regulation and even prohibition? I will argue that the primary purpose of economic governance in a republican economy should be to promote the independence of economic actors as a means of preventing the abuse of economic power and the corruption of public life.

George Osborne is cracking down on tax avoidance. After a scandal in which it has emerged that some major multinationals have paid little or no UK corporate tax, the head of Britain’s Treasury has announced his mission “to turn concern over tax avoidance into a catalyst for change”. Osborne, formerly known as the City-boys’ puppet in power, has turned into the Great Enforcer, riding his “new agenda of transparency” into Ethiopia, Kenya, Ghana, Uganda and Tanzania. But the domestic scandal over tax avoidance – the outraged bluster of Margaret Hodge’s mock trial of the Great Avoiders before the UK Public Accounts Committee; David Cameron’s barely-veiled threat at Davos to corporations who needed to “wake up and smell the coffee”; UK Uncut’s shop-floor protests – has done little damage to its targets. Even Starbucks, which felt compelled to donate £10 million to the Exchequer, apparently because it had listened to customers’ concerns, has ended up paying remarkably little in public contributions.
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The republican commitment to the view that people can be at liberty only when they are secure – and equally secure – from the exercise of arbitrary power, has significant implications for the ‘domestic’ political economy of states. But it also bears on issues of what we may broadly call ‘transnational’ political economy. That is, that the decisions of actors beyond a democratic state may have important consequences for that state’s establishment, capability and even civic disposition. For classical republicans, the root of popular sovereignty is not democratic rule but freedom from ‘alien’ rule. This is, indeed, how the republican concept of freedom emerged in ancient Greece – with the political prospect of rule by Persians motivating a focus on the value of being a free people who rule their own city. The most obvious threat here is being subject to the dominion of another people (direct imperial rule) but as republicanism widens its view of domination from the paradigmatic legal form of the master-slave relation, so ‘alien rule’ comes to encompass other possibilities such as political or economic dependency (indirect imperialism).

What is the future for trade unions in Britain? Last Friday, forty or fifty of us jammed into an Oxford college seminar room to hear that question answered. It was the annual Clement Attlee Memorial Lecture, at University College where the Prime Minister of the post-war settlement spent his student years. Less to remember the great man, we were there to hear Frances O’Grady, the new TUC General Secretary and the first woman to occupy this most pivotal office for the British labour movement.

Outside the banking sector and its critics, not everyone grasped the radicalism of Ed Miliband’s announcement a few weeks ago that the next Labour government will establish a network of regional banks. But this was policymaking at its best, signalling a commitment to radically reform the relationship between finance and the real economy and a determination to make Labour the party of small businesses across the nation. The British banking system is astonishingly uncompetitive: 89 per cent of all our businesses are dependent on the five major clearing banks. Yet over the last 30 years these banks have become disconnected from the needs of these businesses, seeking quick profits in the City and in the property markets rather than long term investments in the industries and regions outside the southeast. Duncan Weldon has calculated that, in the decade before the crisis, 84% of the money lent to British residents by British banks went into property and financial services.