Ignore the ‘Pro-Business’ Rhetoric: A Pro-Rich Government is Anti-Business

03/03/2015 12:00am

Ha-Joon Chang

Ha-Joon Chang
The Guardian, March 3, 2015

View article at original source.

Despite the best efforts of some of its members to discredit it with market rigging, tax avoidance, and unjustified bonuses, the business community is still held in awe in Britain. Any suggestion of higher taxes for top earners or tougher regulations on the abuse of market power is howled down as dangerously anti-business. Politicians who are serious about the nation’s prosperity and its citizens’ welfare, it is accepted, need to be “pro-business”.

But what does it mean to be pro-business? First, we should not confuse a pro-business stance with a pro-rich stance. Not all rich people are business people, or “wealth creators”, as they are often called these days. Some of them have simply inherited vast sums of money, while others have created wealth elsewhere and are simply enjoying their lives in the UK.

These people of course spend money and indirectly create jobs and income in that process. But job – and income – creation through consumption can be done by anyone, if they are given money. Indeed, you could argue that poorer people are more effective in this regard, as they tend to spend a higher share of their income, creating more demands for business. Thus transferring income from the “idle rich” to poorer sections of society through taxation may actually be a pro-business policy.

Then we need to separate the chaff from the wheat. Being pro-business doesn’t – and shouldn’t – mean leniency towards illegal or semi-legal activities by business people and companies, as some Tory party donors and rightwing newspapers want it to mean.

Actually, being soft on rule-breaking businesses is anti-business. When some corporations and business people do not pay their fair shares of taxes, they are increasing the tax burdens of other members of society, including other businesses. When unscrupulous business people break the basic rules of competition, whether it is rigging foreign exchange markets or not paying the minimum wage, they are hurting the rest of the business community.

Now, having accepted that being pro-business does not mean being lenient with law-breakers, can we at least say that it means putting the interests of law-abiding businesses above other things? No – a democratically elected government that does such a thing would be in dereliction of its duty.

Under the influence of the pro-business rhetoric, we have often come to forget that the government has interests other than business to look after. For example, business may want lower corporation tax, but agreeing to this would mean taxing other people more heavily in order to provide the same level of public services. Moreover, there are many entities financed through government spending because we value what they produce, not because they make profits – the BBC, the Arts Council, university departments of philosophy, or of Anglo-Saxon, Norse and Celtic studies.

But even if we accepted that helping business should be the priority for the government, the problem is that there is no such thing as “the business interest”.

Business is made up of many different sectors – agriculture, manufacturing, energy, construction, finance, retail, software, you name it – and many different types of firms, from small carpet cleaning services to medium-sized hi-tech businesses and global giants such as Rolls-Royce or HSBC. This means that a policy helping one section of business may harm others. For example, if you let energy companies abuse their market power, other businesses, which are consumers of energy, suffer. And the finance industry’s liking for a strong currency is bad news for exporting manufacturing firms. Moreover, financial deregulation benefits the finance industry by increasing its options, but that very increase in options makes it less patient, which makes life difficult for companies that want to raise long-term finance.

Even within the same broad sector, business interests differ because different firms use different inputs in different locations. For example, all manufacturing businesses may say they want better infrastructure and workers with higher skills, but what a Birmingham-based machine tools company wants in terms of infrastructure and workers will be very different from that of a Cambridge-based IT firm.

In each of the above cases, it is not clear what is the pro-business thing for the government to do. Should it let energy companies overcharge other businesses? Does it have to put the interests of the financial sector over the manufacturing one? Should it finance skills and infrastructure wanted by the Birmingham firm, or those the Cambridge one needs?

Of course, the official line is that the British government loves and supports all businesses, but exactly because of this vagueness, the more powerful industry lobbies have been able to get “special treatments”. Just think about the explicit and implicit subsidies that the banking sector has been getting in the form of bailouts and cheap money in the last several years. Or how about the fact that the UK has been covertly subsidising rail operators on a massive scale by making Network Rail hugely undercharge for the use of rail infrastructure? And to make it worse, these subsidies are given with very low requirements for standards of behaviour and of performance; contrast these with the standards that are imposed on the recipients of disability benefits or jobseeker’s allowance.

When some businesses get such special treatments, other businesses suffer, as the government has less money to support them through, say, investments in infrastructure, research and development, and skills. This outcome is likely to be bad for most of the business community.

What we need is a genuinely pro-business government, which has a clear economic strategy that recognises different business interests and priorities, while reconciling those with the interests and values of other members of society. If this sounds too radical, it is only because we have allowed the idle rich parading as wealth-creators, rule-breaking business people, and powerful industry lobbies to abuse the idea of being pro-business for their own sectional interests for far too long.

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