Furthermore, to achieve faster growth, Labour has talked about the sort of strategic partnership between government, business and unions beloved by CBI bigwigs. Starmer promises new corporatist institutions, such as an Industrial Strategy Council, the British Infrastructure Council, Great British Energy and a National Wealth Fund, bodies that senior “champions of industry” might be involved with. Why jeopardise the CBI’s “seat at the table” by criticising Labour now, during an election campaign?
The sad truth, however, is that this exchange between Neil and Newton-Smith foreshadows the pitfalls of Labour’s agenda, if implemented. Having the government work directly with business on national “missions” gives firms an incentive to seek political favour and tends to increase the overall burden of regulation.
Why? An “active state” working with business on missions means that companies pursue politicians’ aims rather than what their customers would want. Consequently, more businesses will focus on adjusting their communications, lobbying efforts and investments to secure government support or privileges rather than on creating value for their consumers. This corrupts — in the debasement sense — the underlying goal of business.
While Labour might no longer seek state ownership of the means of production, the government dictating the ends of production is dangerous, too. What’s more, when the state does partner with business to achieve them, it inevitably decides to add a bunch of secondary mandates as preconditions for its taxpayer “support” of firms.
Just look at the manifesto: Labour wants to boost growth, yes, but subject to achieving net zero targets, closing gender, ethnic and disabled pay gaps, avoiding late payments to small firms, enhancing workers’ rights, empowering unions and ensuring living wages. In the United States, the conditions of government-business partnerships under progressive President Biden have been explicit, with government semiconductor production subsidies requiring that recipient firms offer childcare services, diversity audits and unionisation.
Labour says its agenda is both “pro-worker” and “pro-business”, but imposing new social, environmental and employment regulation brings trade-offs, raising firms’ compliance costs and further diluting their focus on customers.
What ultimately happens with this sort of corporatism, as Jonah Goldberg, the American commentator, has written previously, is that business gets treated as the government’s lapdog. The “partnership” is one in which the business community is brought to heel to deliver on the government’s social and economic agenda, getting treats if it delivers and a newspaper to the nose if it doesn’t.
The CBI might view this prospect as the lesser evil after years of volatile policy, Brexit and Conservative inaction on planning. Yet the broader business community should be under no illusions: in this “partnership”, the Labour government will be the senior player dictating terms. And many of those terms will harm Britain’s business environment, even if the CBI is too cowed to say so.
