Social Europe

politics, economy and employment & labour

  • Themes
    • Europe 2025
    • The Crisis Of Globalisation
    • The Future of Work
    • What is inequality?
    • Inequality In Europe
    • Europe’s Refugee Crisis
    • Where Now After Brexit?
    • Understanding PEGIDA in Context
  • Podcast
  • Videos
    • Video Podcasts
    • Social Europe Talk
  • Books
  • Papers
    • Brexit Paper Series
    • Occasional Papers
    • Research Essays
  • Advertise
  • Newsletter

Labour Party’s Economic Rethink Should Focus On Good Corporations

by John Kay on 14th May 2015

John Kay

John Kay

“We will cut spending but not as fast or as nastily as the Conservatives; we be­lieve in a market economy but not very strongly.” These were central elements of the Labour party’s economic policies in last week’s UK general election. They do not constitute a persuasive narrative and they did not persuade.

The European left has been in intellectual disarray since the collapse of socialism. The threadbare content of Labour’s economic thinking echoes similar weaknesses in the French (not very) Socialist party and Germany’s Social Democrats. In Greece and Spain, the extreme parties of the left are gaining electoral ground by promising things they cannot deliver. The third way of Tony Blair, former UK prime minister (and Bill Clinton, former US president), who saw the need for fresh economic thinking back in the 1990s, has collapsed into vacuity.

 So here is one idea to start Labour’s rethinking of economic policy. The profit-making corporation is, should be and will remain the central institution of the modern economy. But that does not mean the purpose of a profit-making corporation is to make a profit; we must breathe to live but breathing is not the purpose of life. The purpose of a corporation is to produce goods and services to meet economic and social needs, to create satisfying and rewarding employment, to earn returns for its shareholders and other investors, and to make a positive contribution to the social and physical environment in which it operates.

Mr Blair flirted with the idea that the purpose of the corporation was a central issue when he embraced “stakeholding” before his election in 1997, but the debate died, partly through the opposition of businesspeople who thought stakeholding meant trade unionists on company boards. It may be an idea whose time has come again.

The usual objection, that an organisation cannot have more than one objective, can be swiftly dismissed. The statesman must balance competing pressures and interests, and every household must manage the sometimes incompatible demands and needs of different family members. Likewise, the job of the professional manager is to balance sometimes complementary, and sometimes conflicting, claims.

Similarly, the good school imparts factual information while stimulating critical thinking. The good smartphone compromises between portability and battery life. We recognise good schools and smartphones when we see them, and we know a good company in the same way.

The good corporation — like the good smartphone or the good school — can be identified by what it achieves. It pays workers a living wage; it does not engage in aggressive tax avoidance. It develops the skills and capabilities of its employees and does not bewilder customers with complex tariff structures. It earns profits, reinvests some and pays a dividend to shareholders. Its executives spend more time walking around offices and shop floors than sitting in the meeting rooms of investment banks. The good corporation contributes relevant expertise to the formation of policy but does not engage in lobbying on a scale that corrupts political decision-making.

The political and social legitimacy of the market economy, and of the corporations through which it functions, cannot simply be asserted — as it has been in the market-fundamentalist rhetoric that has dominated economic policy for the past three decades. Its legitimacy has to be earned by the behaviour of the leading economic institutions. That social contract has too often been broken in recent years. And drawing attention to that breach, and the measures needed to regain trust, is an agenda that is not hostile but rather friendly to the long-term interests of the business community.

This column was first published in the Financial Times and on John Kay’s Blog.

TwitterFacebookLinkedin
Home ・ Politics ・ Labour Party’s Economic Rethink Should Focus On Good Corporations

Filed Under: Columns & Interviews, Politics

About John Kay

John Kay is Visiting Professor of Economics at the London School of Economics and a regular columnist for the Financial Times.

Partner Ads

Most Recent Posts

migration compact European split over migration compact sustains inertia Lena Kainz and Camille Le Coz
far right in Poland The neoliberal far right in Poland Gavin Rae
sustainable finance Can sustainable finance really help solve the climate crisis? Basil Oberholzer
fibre Bread, roses and broadband too? Miranda Hall
neoliberal Interregnum or transformation? Sheri Berman

Most Popular Posts

election in Poland The parliamentary election in Poland—the future at stake Maria Skóra
radical right Why the radical right is no longer the exclusive domain of older, male voters Caroline Marie Lancaster
digital currencies Mario Draghi and the Germans Peter Bofinger
Manchester Could a progressive phoenix arise from the ashes of the UK’s political meltdown? Paul Mason
populism What’s driving populism? Dani Rodrik

Other Social Europe Publications

For a Europe with a Future
Europe 2025 – A New Agenda
OP 14: Changing the Game: EU Development Policy for Sustainable Equality
Austerity: 12 Myths Exposed
The Crisis of Globalisation

S&D Group Ad

At the beginning of the new EU legislative cycle, this occasional paper by Udo Bullmann (MEP and S&D Group coordinator in the European Parliament’s Development Committee) makes the case for an EU development policy that puts the UN Sustainable Development Goals (SDGs) and a concern for human well-being front and centre. The paper argues that EU development policy must serve to fight inequalities in partner countries to enable successful transformations in the spirit of the SDGs. Weaving a concern for achieving greater equality into the process of EU development policy-making, including through ex-ante assessment tools, is key in this regard.


FREE DOWNLOAD

Social Europe Edition Book

Is an unconditional basic income without means-test or work-test compatible with social justice and individual self-worth? Does it open up the space for an end to demeaning labour and a resurgence of voluntary work and cultural life? Is it affordable? This collection of short but compelling essays, all previously published in Social Europe, allows both proponents and opponents to make their case and is designed to extend this vital discussion to a wider audience.


MORE INFO

Hans Böckler Stiftung Ad

The Blocked Completion of the European Monetary Union

The reform of the euro zone is stuck. Against the background of political blockades, this report examines from a combined economic and political science perspective how the Euro can be prepared for the next crisis. The report first identifies general requirements for the stabilization of economic and monetary union. Next, the report reconstructs the political logic of the euro crisis and shows that the prospects for realizing far-reaching reform proposals aiming at a fiscal union are poor. Subsequently, the report develops a proposal of how, under the given circumstances, the room for maneuver within the existing framework of economic and monetary union can be extended in a pragmatic way in order to strengthen national fiscal policy as an instrument of macroeconomic stabilization.


FREE DOWNLOAD

ETUI Advertisement

Migrant workers in Fortress Europe

The number of legally resident migrants stands at over 22 million, but the number of Europe’s “undocumented” migrants, whose status is precarious and whose rights in many areas are limited as a result, is much harder to determine. These migrants are often forced to tolerate adverse working conditions; since they are discriminated against in the labour market, both male and female migrant workers are pushed into low-skill industries and professions that are more hazardous to health and less well-paid than other jobs, a situation that is justified by racist stereotypes and assumptions. The goal of the HesaMag editorial team in compiling this report was to introduce readers to a number of real-life examples drawn from a variety of EU Member States.


FREE DOWNLOAD

Eurofound Advertisement

Challenges and prospects in the EU: Quality of life and public services

What have been the major developments in quality of life and public services in Europe in recent years? This flagship publication provides a synthesis of the main findings on several key topics, based, in part, on European Quality of Life Survey data. It maps developments and perceptions regarding the following: trust in institutions and social cohesion; access to and quality of health and care services; the impact of digitalisation on social services; access to services for young people; and measures aimed at integrating refugees. While the report highlights many challenges and emerging issues for public services, it also showcases a number of positive experiences with the involvement of client groups in the design of services and take-up of new technologies.


CLICK FOR MORE INFO

About Social Europe

Mission Statement & Editorial Team

Article Submission

Social Europe ISSN 2628-7641

Legal & Privacy

Legal Disclosure

Privacy Policy

Copyright

Thought Leadership

XThis website uses cookies to improve your experience and we assume you are ok with this. Do not use this website if you have objections. Read Our Full Privacy Policy RejectAccept
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.

Necessary
Always Enabled

This is an necessary category.

Analytics
Advertisement
Performance
Uncategorized
Save & Accept