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By John Redwood's Diary
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What should we do about big business?

Monday, October 10, 2016 22:24
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There is a notable anti big business mood in the advanced world’s political winds. In the USA both Mrs Clinton and Mr Trump wish to see major changes to the behaviour of large corporations. Mrs Clinton wants to regulate them more, intervene more in health care, and tax them more. Mr Trump wishes to limit their access to cheap migrant labour, and proposes a big tax reform which he hopes will combine lower rates with getting them to pay more and to repatriate offshore cash.

The EU is ever keen to regulate them further . It has already put through controls on bonuses in the financial sector, numerous rule increases on banks, and a blizzard of new laws on everything from the environment to employment. Both the EU and the US authorities are keen to increase tax revenue by tightening tax rules, and keen to fine businesses for wrong doing as another source of revenue for the government.

In the UK the Labour party has moved strongly against companies and capitalism generally, proposing a range of new controls, interventions and nationalisations. Mrs May has been the most balanced of all these actors and actresses, but she too is saying that companies that misbehave over employment or tax should expect tough treatment from the state.

So what has business done wrong? Big business has allowed spectacular failures to disfigure its central contribution to progress and better lives. In an era when business has delivered us the internet, mobile communications, better personal transport, a range of labour saving devices for the home and office and record living standards, there has been a steady drumbeat of disaster or dubious practises from some corporations. We have witnessed the oil spill in the USA, the emissions scandal from VW, employment issues from some UK retailers, pension problems at BHS, tricky tariffs from utilities, lack of customer awareness and a financial crash from banks,and poor broadband in various locations. This has been made worse by a perception that a gilded business elite of executives who do not own their companies think they have the right to huge seven figure sums in remuneration just for being good at corporate politics. They enjoy over the top pay without necessarily delivering the better service or product for customers that might deserve such fabulous rewards. Much of the drive to better and new products and services comes from exciting challenger companies run by people who own and run entrepreneurial businesses.

The public does distinguish between entrepreneurs and company executives or corporate politicians. If someone risks their own money and reputation and builds a big business, they can enjoy great income and wealth as a result. It is someone who is good at corporate climbing, who inherits the success of past generations of executives and shareholders, who needs to exercise some pay restraint and to put the needs of customers and shareholders first before their own vaunting financial ambition.

Changing this culture without driving jobs and business away is not easy, but it is a necessary task. I would be interested in your ideas on what should go into an industrial strategy.

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