The balance between Capital and labor in the 21st century

The balance between capital and labor in the 21st century

Politics can use the pandemic to gain economic change.

The Prime Minister of Britain, said that if you can not work from home and if your place of employment has corona-virus safety protocols in place, you can go back to work.

Left wing social media headlines claiming that Tory's say working class have to go back to work and die; while the middle class can continue to work from home and be safe.

Many do not agree with all Mr Johnson says and does and sincerely believe that there has to be a better balance between “Capital” and “Labor” BUT this type of reaction is just lunatic.

For modern industrialized nations to function and be reasonably democratic, we need both Capital and Labor- in an ideal world we would not start from the existing situation but we can not change history (even if some reporters may think they can) In Britain things are as they are, wishing they were different will not help anyone. Since we have 70 million people to house, feed, educate, defend, keep amused and keep healthy we have to use commerce and industry, we can not all go back to being self sufficient. Industry needs customers but in order to meet the needs of those customers it increasingly needs both investment and human enterprise. If we do not provide both then all industry will pass to other nations and we will have to import all the things we need, for all the 70 million.

Capital-Investment – comes from tax payers or “private“ institutions and individuals. If it is all to come from tax payers, then those paying tax will have to have very deep pockets and very high incomes--- wait --if no investment there is no employment and no incomes. If your nation had a huge gold mine it is tempting to think it could just sell the gold and use the money to pay non productive employment but this can only be a short term plan; the gold you sell does not go back into the ground it stays in circulation and after a while you will bring down the value and price of gold and get less money per ton of gold. So you dig out more tons and reduce the value even further. In the end your Gold is worthless and you have a huge non productive work force to pay. So the nation needs investment that does not come from taxation.

Other nations also need investment and so there has to be some form of incentive for investment in British enterprises. These incentives can be political stability, physical security and a financial return; that is the investor gets their investment value back plus some “profit”. This is how the world works at the present time. Modern industry is moving away from the need for physical human labor and towards the need for skilled human mental labor. Education is part of the need to meet this situation. Getting the balance right so that investment takes place without reducing non investors to subordinate status, is difficult. Simply declaring investment profits are some how immoral and should not be allowed, is not going to help in anyway at all. If there is no investment there is no work for labour, physical or mental. This is a fact of modern life. Using the tax payers money to artificially provide “employment” for millions is a short term act that, over a medium term, will end in economic disaster and huge deprivation, the state will not be able to meet the needs of any of its people.

Getting a balance where investment is encouraged and supported while providing empowerment and self improvement for all the rest of the population, is a very difficult trick. The variables and the constant global changes, make it a very uncertain task.

The global contagion of Corona-virus has caused much pain, but Pain passes, it is scars that remain but it is also an opportunity to try and change the capital to labour balance. Returning to the wound analogy; the scar from a scalpel expertly used, with the wound bound quickly, heals with very little visible reminders remaining A wound from a scar left to dry and fester causes irritation and unsightliness for years, long after the pain has gone. If immediate firm action is taken, then we may close a clean wound. Vast amounts of tax money, all around the world, have gone into supporting both health care and economic survival. The financial sectors will, quite naturally since it is why they exist, seek to profit by asking for interest on all the money they have lent to governments, individuals, enterprises and global industries. The cost of paying this interest and repayment of loans will destroy the chance of a rapid return to economic normality but it also is a chance to change that normality. If every nation sets up a “national enterprise bank” that is state owned but run and managed as if a commercial set up. There are no government bureaucrats, the staff are hired, fired and promoted on merit, get things wrong and get fired. No faceless committees endlessly discussing what to discuss at the next committee meeting. These enterprise banks to take on all the debt caused by the economic actions taken to alleviate the effects of the virus. They should then work together internationally, to establish the lowest interest rates and best repayment program for getting debt paid off. Then they can take on their real role, that of providing capital to new, small and medium size businesses, on terms that allow growth of the business, rather than growth in profit for the banks. The commercial banks can finance the global companies, private investors can buy shares in the new,small and medium firms and if successful, these investors will be rewarded by sharing the profits. If they fail the investment is lost.

General rules should be introduced that all businesses with over 100 employees, must have a profit share scheme as part of the employment contract. Speculation of all sorts, from hedge funds to share manipulation to be totally banned with draconian punishment to breaking this rule. The rules governing commercial take overs needs to be changed. Any take over or merger must, by international law, guarantee no redundancies within 5 years of the financial action. In Britain we have had situations when an oversea company has promised no redundancies, in order to get approval for the take over and then ignored their own promises and cut staffing levels in British manufacturing plants. Such promises should be legally binding at all times.

Politicians need to be thinking about the future, not just next week's sound bites, not just next years opinion polls but constructively thinking about the long term future. It is no good leaving this to the administrators, they will always be governed by a mixture of their own self interest and what is the easiest thing for them to do. We elect and pay politicians to be the policy makers, policies that the administration and bureaucracy then ensure becomes action. The electorate have a right to expect politicians to think about the future carefully formulate policies for the future prosperity and well-being of all the electorate, gain democratic approval for those policies and then ensure their policies get actually turned into action.