Felix FitzRoy and David Spencer highlight some fundamental problems of UK economic policy, as exposed and exacerbated by the lockdown. They write that, alongside the temporary emergency measures adopted, there is an urgent need for wider reforms, based on the goal of promoting economic democracy

FitzRoy, Felix R.

Spencer, David

English

LSE Research Online

Economic	democracy:	We	must	restructure	theeconomy,	not	return	it	to	its	pre-COVID-19	stateFelix	FitzRoy	and	David	Spencer	highlight	some	fundamental	problems	of	UKeconomic	policy,	as	exposed	and	exacerbated	by	the	lockdown.	They	write	that,alongside	the	temporary	emergency	measures	adopted,	there	is	an	urgent	need	forwider	reforms,	based	on	the	goal	of	promoting	economic	democracy.The	COVID-19	crisis	has	presented	clear	challenges	for	UK	economic	policy.	It	hasmeant	the	state	intervening	in	the	economy	in	unprecedented	ways,	such	as	through	the	implementation	of	a‘furlough’	scheme.	But	the	concern	is	that	current	economic	policy	is	limited.	Many	workers	still	face	unemployment,with	little	help	from	the	state.	Many	others	face	having	to	get	by	in	low-paid,	unsafe	work	conditions.	For	all	the	talkof	‘key’	workers,	there	remains	no	serious	effort	to	regulate	work	and	to	combat	low	pay.There	is	also	concern	that	emergency	economic	policies	will	be	reversed	too	quickly.	Doubts	remain	about	thelongevity	of	furloughing,	for	example.	More	generally,	the	spectre	of	austerity	still	looms	over	economic	policy.Higher	public	spending	could	still	be	scuppered,	under	a	false	and	dangerous	insistence	on	bringing	down	thedeficit.	Further,	there	is	the	wider	concern	that	current	policy	is	about	returning	to	‘business	as	usual’.	In	this	case,the	need	and	opportunity	will	be	missed	to	rebuild	the	economy.	Indeed,	the	danger	is	that	the	same	inequalitiesthat	existed	before	the	crisis	will	be	magnified	and	increased	in	the	future.	In	a	new	paper,	we	highlight	the	problems	of	current	economic	policy	in	the	UK.	We	also	outline	various	measures(including	an	emergency	universal	basic	income	and	a	Green	New	Deal)	that	could	be	used	immediately	to	supportthose	worst	affected	by	crisis.	But	we	also	propose	wider	reforms	that,	if	enacted,	would	help	to	create	a	moresustainable	economy	–	one	that	would	offer	not	just	greater	prosperity,	but	also	the	conditions	for	higher	wellbeing.These	reforms	are	based	on	the	goal	of	promoting	economic	democracy.Unequal	economic	powerThe	crisis	has	shown	the	fragilities	of	the	economic	system.	In	particular,	it	has	shown	the	precarious	nature	of	work–	many	workers	have	faced	redundancy	without	adequate	economic	and	social	protection.	Unemployed	workersface	the	prospect	of	meagre	benefits,	issued	through	a	welfare	system	that	is	not	designed	to	accommodate	highunemployment.The	crisis	has	also	exposed	the	inequalities	in	work.	Firms	remain	places	where	workers’	interests	are	secondary.Human	resource	management	reduces	labour	to	a	cost.	Workers,	in	turn,	are	treated	as	bundles	of	human	capital.In	work,	workers	face	having	to	do	tasks	that	are	required	by	employers	and	have	limited	autonomy	over	their	work.Hence,	in	the	crisis,	firms	have	decided	to	furlough	workers.	Decisions	on	when	workers	come	to	work	are	also	stillleft	with	employers.An	exception	is	the	‘gig	economy’,	where	individuals	are	forced	(by	their	own	material	deprivation)	to	work	in	orderto	live.	Choice	here	obscures	a	dependency	on	work	and	exposure	to	chronic	low	pay.The	issue	for	us	is	that	discussion	of	reforms	in	the	crisis	has	missed	the	need	to	challenge	the	power	inequalitiesin	the	economy.	To	the	contrary,	policies	implemented	thus	far	seem	to	be	about	restoring	power	for	the	alreadypowerful.	But	challenging	power	is	vital	for	recovery	and	renewal	beyond	the	crisis.Here	there	are	different	policy	options,	from	higher	progressive	taxes	to	the	introduction	of	new	bailout	schemesthat	make	finance	for	quoted	companies	conditional	on	equity	stakes.	One	way	forward	would	be	to	ensure	that,where	government	grants	financial	support	to	firms,	it	does	so	with	the	requirement	that	the	firms	adopt	meaningfulco-determination	and	profit	sharing.	A	new	social	contract	could	be	implemented	with	the	government	requiringfirms	that	receive	support	to	democratise	work	and	share	surpluses.	Such	a	requirement	could	pave	the	way	forgeneral	legislation	for	economic	democracy,	a	long	overdue,	fundamental	reform	recently	supported	by	thousandsof	scholars	in	The	Guardian.British Politics and Policy at LSE: Economic democracy: We must restructure the economy, not return it to its pre-COVID-19 state Page 1 of 3		Date originally posted: 2020-06-05Permalink: https://blogs.lse.ac.uk/politicsandpolicy/economic-democracy-covid-19/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/The	guiding	principle	must	be	to	restructure	the	economy,	not	return	it	to	its	pre-crisis	state.	Key	objectives	shouldbe	the	empowerment	of	workers	in	firms	and	the	shift	in	governance	away	from	shareholder	value	capture.	Onlythen	can	we	seek	progressive	change,	including	higher	pay	and	better	working	conditions,	but	also	shorter	worktime	and	greater	human	freedom.Political	obstacles	and	opportunitiesBut	in	advancing	radical	change,	there	are	political	obstacles	to	overcome.	There	are	always	some	groups	that	loseout	from	fundamental	reform,	and	business	lobby	groups,	in	particular,	are	likely	to	push	for	a	return	to	the	statusquo	ante.	Conservative	politicians	will	also	resist	change.The	economist,	Michal	Kalecki,	in	a	famous	article	published	in	1943,	wrote	about	the	political	obstacles	to	fullemployment.	Capitalist	employers	required	unemployment	to	retain	the	effectiveness	of	‘the	sack’.	They	alsowanted	to	retain	their	ability	to	exercise	control	over	the	economy.	While	capitalist	employers	would	benefit	fromhigher	profit	in	the	event	of	the	government	pursuing	full	employment	policies,	they	would	still	resist	such	policiesbecause	of	the	political	effects	of	the	policies	on	their	right	to	manage.But	the	political	obstacles	identified	by	Kalecki	alert	us	to	the	reforms	required	in	work	and	society	more	generally.In	bringing	democracy	to	the	workplace,	cooperation	can	be	secured,	without	the	threat	of	unemployment.	And	withsociety	organised	on	principles	of	democracy,	not	rule	by	capital	owners	and	their	representatives,	there	is	scope	toachieve	high	surpluses	with	full	employment.In	the	present	crisis,	there	is	the	risk	of	unemployment	becoming	entrenched,	centralising	power	and	preventingdemocratic	change.	Again	this	is	where	reform	is	needed,	both	to	challenge	and	reform	power	relations.	In	this	way,the	crisis	opens	up	space	for	a	different	politics	–	one	where	economic	democracy	is	enhanced.J.M	Keynes,	in	another	classic	essay,	wrote	positively	about	the	economic	possibilities	for	the	future.	Writing	in	thedepth	of	the	Great	Depression,	Keynes	looked	forward	to	a	time	when	abundance	would	replace	need	and	freetime	would	replace	drudgery.	The	parallels	with	the	present	are	stark.	Hence	Keynes	wanted	his	reader	to	thinkbeyond	the	crisis	–	indeed,	he	wanted	his	reader	to	keep	alive	the	idea	of	–	and	strive	for	–	a	better	future.	Now,	wecan	argue	that	a	similar	optimism	is	needed	in	order	to	reconstruct	the	economy.A	missing	aspect	of	Keynes’s	essay	was	the	idea	of	democratic	reform	in	work.	Keynes	was	confident	–	ifunrealistically	so	–	that	capitalist	employers	would	pass	on	the	benefits	of	productivity	growth	to	workers.	What	hefailed	to	note	was	how	capitalism	would	require	deeper	reform	to	realise	the	kind	of	shared	future	he	wanted	toachieve.	Here	Kalecki	was	more	conscious	of	the	changes	required	to	transform	society	for	the	better.The	general	point	is	that	while	the	crisis	creates	hardship,	it	also	offers	an	opportunity	to	rethink	how	we	organisework.	Conservative	politics	will	try	to	hold	back	necessary	reform	to	conserve	concentrated	power,	privilege,	andwealth,	but	that	only	illustrates	the	need	for	such	reform	to	occur.	In	the	end,	there	is	no	other	way	to	live	betterthan	to	democratise	the	institutions	that	govern	the	way	we	work._____________________About	the	AuthorsFelix	FitzRoy	is	Professor	Emeritus	of	Economics	at	the	University	of	St.	Andrews.			David	Spencer	is	Professor	at	the	University	of	Leeds.		British Politics and Policy at LSE: Economic democracy: We must restructure the economy, not return it to its pre-COVID-19 state Page 2 of 3		Date originally posted: 2020-06-05Permalink: https://blogs.lse.ac.uk/politicsandpolicy/economic-democracy-covid-19/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/	All	articles	posted	on	this	blog	give	the	views	of	the	author(s),	and	not	the	position	of	LSE	BritishPolitics	and	Policy,	nor	of	the	London	School	of	Economics	and	Political	Science.	Featured	imagecredit:	by	Ross	Findon	on	Unsplash.British Politics and Policy at LSE: Economic democracy: We must restructure the economy, not return it to its pre-COVID-19 state Page 3 of 3		Date originally posted: 2020-06-05Permalink: https://blogs.lse.ac.uk/politicsandpolicy/economic-democracy-covid-19/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/

Economic democracy: we must restructure the economy, not return it to its pre-COVID-19 state

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Economic democracy: we must restructure the economy, not return it to its pre-COVID-19 state

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