Two deep recessions in quick succession can change the world. The financial crisis of 2008 is shortly to be followed by a deeper worldwide recession caused by coronavirus. This is now unavoidable and the pressure for answers and radical change will be intense, particularly from the left but not only from there.
There is a broad realisation that the current economic and social system is not working for too many people around the world and for the first time in decades the left of centre thinking has the wind in its sails. Capitalism and free markets, the unbeatable economic philosophy of the past several hundred years, is looking vulnerable. We can either try to head this off with new right of centre thinking or let nature take its course.
Even before the coronavirus outbreak there was a gathering political and commentariat consensus that it was time for the days of balancing the books to end in favour of big public sector spending. Since the coronavirus hit, the left now has a convincing narrative that supports the need for a big state and the importance of its intervention on behalf of the people who need support.
The state has become the friend, rather than enemy, of people getting on in life. In Britain this means the next decades could easily belong to notions of very high taxation and state intervention, unless the Conservative government resets and refreshes capitalism as a force for good. It must ensure poorer people benefit transparently from capitalism and free markets, and most importantly from ownership.
This requires a re-orientation of capitalism towards customers and taxpayers, ensuring they are the important beneficiaries of business success whether local, national or international. In the future, the customer and taxpayer should become synonymous with shareholder in its meaning for companies and government.
The argument from Labour will be that state ownership of a swathe of industries will be the way to share ownership. Of course, nationalisation shares nothing, merely placing ownership in government hands with no direct benefit to citizens. Replacing a faceless business with a faceless bureaucracy has no value.
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A better and equally radical way exists to share wealth and power and it begins with all customers of “monopoly industries” having a say in and a share of their wealth generation. In the future, if companies wish to run our water, electricity, gas, or rail operating companies for example – with little in the way of functioning market competition – they must commit a minimum of 20 per cent of their shareholder value for their customers to own and benefit from. This gives customers an interest in the success of the business and a strong voice in it. It also gives the companies loyal and interested customers and shareholders.
Wherever the government is the owner, it should be ensuring its customers, the taxpayers, have a share. For example, in the case of social housing, those who pay their rent on time and are in work should automatically own 5 per cent of their home after 5 years (and 10 per cent after ten years). Good citizens should earn a reward for doing the right thing and get a stake in society. It should be the priority of every part of government to seek out ways to share its hoarded wealth with taxpayers.
This new economic model is admittedly a harder sell in the private sector. Yet banking and some parts of the financial sector have once again demonstrated themselves, even in a national emergency, to be greedy and self-interested, focused primarily on protecting their own interests.
Our financial system is broken, it has too little interest in companies or people, or compassion or moral compass. The government should set a new criterion for obtaining or keeping a banking license – that customers of banks must own 20 per cent of their shares. Huge financial profits would start to be shared with all bank account holders as well as shareholders. The feelings of anger and unfairness about the system would slowly disappear.
Across many other parts of the private sector, the government will now have considerable leverage to change the balance of power towards citizens and customers. The lockdown has put many companies on the cusp of disaster, possibly going out of business. It will cost hundreds of billions of pounds of borrowing and taxpayer money to save them, so it is only fair taxpayers are given the appropriate value shareholding in return.
SMEs should be fully returned to the economy with any debt paid as quickly as possible – but big companies, in return for any bailout must commit to a 20 per cent customer shareholding.
The great thing about customers, whether of monopoly industries, private sector or the state, is no-one knows their status, whether they are rich or poor. They are just people who pay for a service or a product, and in return they get some value from wealth creation.
With a bit of creative thinking this could go much further. The net result must be everyone wins, as people get a stake in capitalism and free markets through regular financial returns and better distribution of wealth.
In return, government and companies get more engaged customers – interested in the size of salaries and who is on the board – without stopping businesses making important decisions. It makes companies more accountable to customers, brings better behaviour, as well as sharing the wealth generated.
We do have a choice. We can bring the radical thinking to bear now or watch the world’s most successful economic model be swept aside on a political tide that combines coronavirus, financial greed, recession, unfairness and lack of opportunity.
Rob Wilson is a businessman, writer, former government minister and MP.