Roger James: Why we need more equality, not more economic growth

Our model of growth which asserts that ‘the bigger the cake’ the more for everyone does not work, greater inequality undermines economic success

Bill Nighy and the Robin Hood Tax

Long-time campaigner for a Robin Hood Tax on banks, Bill Nighy

The debate on capitalism continues! President Barack Obama’s  State of the Union address focused on tax inequality as one basis for economic reform and David Cameron has called for ‘Moral Capitalism’. So this week I’m looking at a some more areas of possible action . Firstly let’s look at change that is happening via partnerships and constructive engagement with business.

As Abraham Lincoln said: “If you wish to win a man over to your ideas, first make him your friend.”  Industry bodies are promoting corporate social responsibility (CSR).  CSR Europe is the leading European business network for corporate social responsibility and Forum for the Future is a non-profit organisation working globally with business and government to create a sustainable future.

Climate change is a big corporate challenge and The Carbon Trust works with companies to reduce their carbon footprint. Environmental impact is a big sector for activity. Forestry certification is an independent, non-governmental, organisation established to promote the responsible management of the world’s forests.

The  Roundtable on Sustainable Palm Oil promotes  the growth and use of sustainable palm oil products through credible global standards and engagement of stakeholders like WWF.  Biofuels are now a hugely controversial issue and organisations like Action Aid and others are campaigning on these concerns.

There are a range of Private Voluntary Initiatives, such The Kimberley Process  involving governments, the World Diamond Council and NGOs to end the trade in conflict diamonds. The Extractive Industries Transparency Initiative sets a global standard for transparency in oil, gas and mining while the  Ethical Trading Initiative  is an alliance of companies, trade unions and voluntary organisations. working in partnership to improve the lives of poor and vulnerable workers.

The Fairtrade Foundation deals positively with business to help create s fairer trading system. These partnerships while many are far from full-proof or binding have helped create greater awareness and action.

This brings us to the final area of ensuring fairer practices by enshrining in regulation or systems of rules.

The UN calculated that 77,000 multinational companies have 770,000 affiliates and employ 62million people exporting goods and services worth $4trillion.  They are very significant actors in trade and politics, and there are many hard fought international agreements to guide their practices.

There is a huge body of international law and treaties  but it is often very difficult to ascertain the exact legal force  or status  of any singular agreement, although they may evolve over time into hard law.

They include The United Nations Global Compact  the world’s largest voluntary corporate responsibility initiative offering a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles. Others include the OECD Guidelines for Multinational Enterprises the Global Reporting Initiative and the ILO Declaration on Fundamental Principles and Rights at Work..

One of the most important recent  frameworks has  been drawn up by Professor John Ruggie, the United Nations Special Representative of the Secretary-General on the issue of human rights and transnational corporations who issued a final Report and Guiding Principles on Business and Human Rights in  2011.

This is currently a live issue  as the UK government is seeking changes to the Legal Aid, Sentencing and Punishment of Offenders Bill. Professor Ruggie wrote to the government, expressing his concern on the position of legitimate claimants in civil actions alleging business-related human rights harms, particularly in cases involving large multinational enterprises. This issue is of great current concern to Amnesty and is the focus of Oxfam action.

While international negotiations such as  WTO Doha Round set up  to improve the trading prospects of developing countries, 10 years of work has failed to reach  agreement. Others, including the long campaign to internationally regulate the arms trade  which will hopefully reach fruition at the UN this July have offered more success.  The UK, also acts as part of the EU, helps set  key regulations in European environment policy, which aims to ensure  sustainable development.

Sometimes this legislation can be controversial as in biofuels  which set a binding minimum target for biofuels of 10% of vehicle fuel by 2020. Biofuels can be very environmentally destructive and divert land from food production.

There is huge debate and just recently Norman Baker, the Transport Minister in charge of biofuels at the Department for Transport, announced that he will be freezing the biofuel target at 5% by 2014.

There is also currently much debate on  a new European law  to force oil, gas, mining and forestry companies to publish the payments they make for every project in every country they operate. If you want to engage UK politicians on these  issues a good place to start  might be the  All-Party Parliamentary Group on International Corporate Responsibility  consisting of MPs who could be useful allies on these concerns. The UK Government also publicly consults on a range of issues. You can respond to these.

While financial services contribute £50bn to the UK national coffers every year and the sector makes up 10% of the economy, financial regulation or the lack of it has been at the heart of the economic crisis. There are many actions we can continue to take that will help reform and change the system.

A key area to tackle are tax havens that provide the ultimate source of strength for our global elites. The Tax Justice Network promotes tax justice and tax cooperation and resists tax avoidance, tax evasion and tax competition. The Organisation for Economic Co-operation and Development (OECD) said the reform  could provide governments with up to $100bn (£62bn) in additional tax.

HM Revenue and Customs have failed to collect over £25bn in unresolved tax bills from major firms, according to the Public Accounts Committee.  UK politicians have called for more action on tax justice. The Robin Hood Tax, a tiny tax on financial transactions although opposed by the UK Government, has also received huge global support

This survey across the possibilities to help create a ‘fairer capitalism’, taking in investment  and consumer decisions, campaigning on bad practice, partnerships and regulation offer us many opportunities to create change. These all involve tackling the power relationships between the private sector, the state and the individual .

There is, however, one story at the heart of this, inequality. If we are to have an economic system that provides for human needs in a fair and environmentally sustainable way, equality is key.

Oxfam has just issued a report which highlights that inequality has risen across the G20 as economic growth fails to trickle down to poorest. I would like to assert that inequality is not just about the distribution of the benefits of an economy, but is a vital component of a system that ensures a successful economy.

Our model of growth which asserts that  ‘the bigger the cake’  the more for everyone does not work, greater inequality undermines economic success. Inequality, including gender equality, is bad for everyone. This little video about the influential book on equality ‘The Spirit Level’ explains why this is. These arguments are explained more in the cost of inequality by Stewart Lansley.

These are some thoughts from me – back to you to continue the debate – it is not going away!

Roger James is a campaigner for Oxfam South West in Bristol

3 Responses to Roger James: Why we need more equality, not more economic growth
  1. Roger James
    January 30, 2012 | 12:41 pm

    RAB – thank you for your comments. Well, it seems to me that that an economy is based on people's work and finite natural resources. You give what amounts to a standard definition of GDP- which simply measures the amount of activity – but unless this is based on human values and increases general welfare and does not destroy the environment – what is the point?. Wealth for Wealth's sake. Value can be extracted from people by exploitation or from discounted use of natural resources- this is not sustainable. My point is that greater equality is essential for an economy to thrive for the mutual benefit of people and the planet- It is not a purely redistributive process or your 'cake' (your term not mine) , If you don't believe me ask Warren Buffet? – he said "I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GDP would go up. But the utility of the product would be zilch"
    Meanwhile.. an Interesting blog on New Statesman I Movement growing transferring your money to an ethical bank, you can make a change to the financial system

    • RAB
      February 2, 2012 | 12:19 am

      Roger, you are conflating Moral Value (who gets to decide that, you?) and economic Value, which you appear to not have a clue about, just like your Leftist Statist friend Warren Buffet.

      Perhaps this gentleman could help you with the Economic version…

      You are also an employee and propagandist for a multi National global organisation that started out in 1942 with the very best of intentions, that of alleviating poverty, i.e. Famine. It has now morphed into a political left wing pressure group that has, along with Greenpeace and the WLF and others, huge influence on Governments worldwide. Not only that, but the majority of the money you use in these pursuits comes from those very same Govts, and ultimately out of my pocket as a taxpayer, without my having any say in the matter. I thought Charities were supposed to get their money strictly from public donation, not from the public purse, and are supposed to be non political? Oxfam doesn’t really qualify on either of those counts, and isn’t really a charity as defined by the Charity Commission any more, is it?

      I am a Libertarian. I would like to see the least Govt possible and free market Capitalism at least tried ( It does not exist at present does it?).

      I would have let the banks fail. That is the essence of Capitalism after all, take a risk and suffer bankruptcy if it goes wrong; it concentrates the mind wonderfully. But our gutless clueless Politicians have deemed that some things are “Too big to fail”. This from buffoons who’s only expertise is to con us into electing them every 5 years, and cannot balance their own expense accounts, let alone get to grips with Macro Economics.

      The Bankers, who are being rightly reviled, are laughing all the way to their Off shore deposits with their fat bonuses because our political elite has let them. They have privatised the Profits, and socialised the debts. Insane!

      But our Governments and the EU are principally to blame because they have not only let them, but colluded with them in doing so. The Sovereign Dept crisis is happening not because the bankers have stolen and spent all the money, but because our economically illiterate Governments have. Let’s kick those bums (all of them Con/Lib/Lab) out first.

      There is a massive crash coming, only a fool or a politican denies it. Let’s get it over with as quickly as possible. It will hurt, it will hurt badly, but it will hurt worse by continuing to just re-arrange the deck chairs on the Titanic . Then maybe we could try some Austrian school economics, not the insane Keynesian crap that has prevailed for the last 70 years.

  2. RAB
    January 29, 2012 | 2:31 am

    You prove yourself to be more Economically illiterate with every article you write Roger.

    The Economy is not a cake. There is not a finite amount of wealth that can be sliced to give everyone fair shares, and if it is viewed that one bunch of people are seen as having a bigger slice than others, their slice can or must be reduced and given (or forceably given) to those with a smaller slice.

    Wealth can be increased and it can be destroyed. You must know by now that the money we use is based on nothing at all. It is Fiat money, printed money, money from thin air. Wealth and value come from the amount of transactions in goods, services and property of mutual benefit we enter into. And most of all Wealth must be earned, not stolen from one group and handed out to another who have done nothing for it.

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