Democratic capitalism is in crisis but Westminster politicians remain in denial – Stewart McDonald

Martin Wolf, the Financial Times columnist and high priest of globalisation, published his new book this week to rave reviews from Ben Bernanke, former chair of the US Federal Reserve, and Sir Angus Deaton, winner of the 2015 Nobel Prize in Economics.

These men are not firebrand radicals, they are made and moulded by the economic establishment. And yet they have all come together to nail their colours to the mast in support of Wolf’s central argument: something is deeply broken with our economic system.

In his book, The Crisis of Democratic Capitalism, Wolf argues that the Dickensian inequality which increasingly defines life in the US and UK tugs at the threads which hold our liberal democracy together, while stagnating real wages, declining social mobility and job insecurity have combined to drive down life expectancy and happiness alike. Our economic system, he argues, has “dissolved” citizens’ hopes for their future as our lives become increasingly nasty, increasingly brutish, and increasingly short.

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Wolf convincingly demonstrates the emergence of an economy rigged in favour of his own generation, something that will not come as news to any young person struggling to scrape together the deposit for a house while paying exorbitant rents for poor-quality housing. It was a point reinforced by that other esteemed organ of the economic establishment, The Economist, which recently lamented that “Britons in their 30s are stuck in a dark age”.

But this article is neither a book review nor an attempt to wade into the intergenerational culture war. I want only to highlight the fact that the economic orthodoxy which defined the past 40 years is being washed away by a tide of economists who recognise that our economic model has warped into something that no longer serves the majority of citizens. Working people can see this in their payslips and in prices, leading to many going on strike, in a cry for politicians to wake up.

The BBC is also on something of a journey in this regard. In a review of its own economic reporting, commissioned by the BBC Board and conducted by independent experts, it noted that “too many journalists lack understanding of basic economics or lack confidence reporting it” and found that, when talking about austerity, the corporation was too often guilty of reporting a political opinion as economic fact. This recognition, while welcome in its own right, should be viewed as part of a wider realisation across the West that we can and must have a more rigorous debate about the economic foundations upon which we build our open societies. This new economic dawn, however, is yet to break over Westminster.

The tragedy of Liz Truss was that her diagnosis was correct. She was one of few Conservative politicians willing to admit that something has gone badly wrong in the United Kingdom. She recognised that too many people have to leave their communities to find a good job, that too many people are incentivised to engage in economically unproductive, rent-seeking behaviour, and that all of us suffer from living in a country crippled by low growth, low productivity and low wages.

Her quack cure, cobbled together by extremists and ideologues, was worse than the disease. But the defining problem of political life remains the same: to address the grotesque maldistribution of economic wealth and power in the country. There could be no more apt reminder of the urgent necessity of this task than this week’s news that British Gas has been sending debt collectors to break into the homes of single mothers struggling to keep their children warm, while oil executives take home record pay cheques.

Dickensian levels of inequality are increasingly part of life in modern Britain (Picture: Hulton Archive/Getty Images)Dickensian levels of inequality are increasingly part of life in modern Britain (Picture: Hulton Archive/Getty Images)
Dickensian levels of inequality are increasingly part of life in modern Britain (Picture: Hulton Archive/Getty Images)

Indeed, last year, as households were confronted with rising food bills, falling wages and energy bills that will force them into destitution, the 2022 Sunday Times Rich List welcomed in “a golden era for the super-rich”, noting that the top 250 entries in that year’s list had hoarded more wealth than the entire 1,000 entries of the 2017 Rich List combined. Might this be a factor for increasing disengagement with modern capitalism? What about the fact that 15 out of the past 16 treasurers of the Conservative party were also major party donors who were later made legislators for life? Might this also erode faith in democratic institutions? Such disregard for the reputation of our public sphere doesn’t come cost-free.

These questions need to be taken seriously in Westminster, but also here in Scotland. Governments must take the health and resilience of our liberal, open society as seriously as they take the health of their economy and national security, for these things cannot meaningfully be separated – as is well understood in countries such as Finland, Denmark and Norway. Corporations too must recognise they have a responsibility to invest in the people and society that makes their very existence possible.

And while there are promising hints that the nightmare of Conservative rule will soon be over, their damaging legacy will haunt us for decades to come. Their party has hollowed out our economy and eroded the public’s faith in electoral politics. Meanwhile, the Labour party – still struggling to exorcise the ghost of Jeremy Corbyn – remains unwilling to speak about the structural problems which haunt the British economy for fear of upsetting Leave voters. Westminster remains trapped in 2010s, wedded to an outdated economic orthodoxy being trashed everywhere from the slopes of Davos to the pages of the Financial Times.

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The opportunity that independence offers is the chance to do what the UK has never done: to reflect upon what we want our state and society to be. Most other countries went through that process upon their founding or when writing their constitution, while the United Kingdom – its rules proudly unwritten – never has. But until we rebalance where political and economic power lies in our country, our society and democracy will continue paying the price.

Stewart McDonald is SNP MP for Glasgow South

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