Arguments for growth

The Social-Democratic arguments for Scottish independence are plentiful and good. I haven’t spent much time looking at other reasons in favour, though, which is why I found the article “I’ve Decided To Vote Yes” by Ewan Morrison so interesting. He notes that Scotland has low levels of investment risk and venture capital, and suggeste that a “Yes” vote could be a path to a Scotland more welcoming of innovation. (Having visited Codebase the other week, knowing a bunch of people working in startups there, and seeing how quickly it is expanding, makes me think that the potential is both present and eager to grow.)

Where is Scotland’s wealth, and why do adventurous and innovative businesses not benefit from the risk taking of venture capital? The answer is another example of how the clichés about the Scottish mindset are true. Scotland does have wealth but the wealthy in this country secret their wealth away in very conservative forms of investment – pension funds, mortgage funds. These are not really risk-taking forms of investment at all and are cowardly and stingy, offering only a few percentage points more return than the interest rates of any actual bank. The rich in Scotland are mean and they keep their money secret and to themselves, they don’t take risks with it, they are not enterprising with it, and the last thing they spend it on, at the moment, is reinvesting in Scottish business start-ups and innovative ideas.

This is a mindset problem that a new Scotland is going to have to address. I say Scotland and not ‘The New Scottish Government’ because we are already far too dependent on government, far too statist. The new Scotland should be a powerhouse of invention and venture, and should have to be reigned in by Government, not the way we tend to see it at the moment, as utterly dependent upon government and government hand-outs, that are only there to replace the lack of financial trust we have in our own people.

Relevant to this is “The Pitchforks Are Coming…For Us Plutocrats” by Nick Hanauer. (Via Abi on Making Light) Here is a dyed-in-the-wool capitalist making a clear argument for the necessity of increasing minimum wages:

The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.

What a great idea. My suggestion to you is: Let’s do it all over again. We’ve got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too.

It’s when I realized this that I decided I had to leave my insulated world of the super-rich and get involved in politics. Not directly, by running for office or becoming one of the big-money billionaires who back candidates in an election. Instead, I wanted to try to change the conversation with ideas—by advancing what my co-author, Eric Liu, and I call “middle-out” economics. It’s the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines—and has so screwed the American middle class and our economy generally. Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another.

Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.

If you can’t afford to pay a living wage, you can’t afford to do business.

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