Capital, capital, capital: Why there can be no Power to Create without a property-owning democracy

The late John Rawls, a passionate advocate for a property-owning democracy.

Simply put, this is about enabling more people in more places to realise their ideas and shape the world around them – or, in the recent words of Matthew Taylor, ‘to be authors of their own lives’. In practice this could mean anything from starting a business, to running a campaign, to shaping the delivery of public services. One of the best examples I’ve come across recently is that of the students at Manchester University, who took it upon themselves to challenge (and offer an alternative to) the neo-classical economic theories that were dominant in their teaching.

We may quibble over definitions and semantics, but I doubt anyone could really disagree with the sentiment behind the Power to Create. The real question is how to nurture this capability. Over the course of the 20^th century the consensus was (and still is) that the ability of people to ‘get ahead in life’ is fundamentally determined by the quality of their education – technical but also generic. Blair’s mantra of education, education, education epitomised the widespread view that with a few qualifications and a university degree the world is yours for the taking. It’s one reason why education remains such a politically toxic arena, from the debates over grammar schools to the backlash against rising university tuition fees.

Needless to say, those with higher skill levels do indeed earn greater amounts and are in a better place to lead more fulfilling and prosperous lives. But the degree to which this gives people a ‘premium’ appears to be diminishing. Why? In short because human capital is becoming less important relative to physical and financial capital (houses, stocks, savings etc.) when it comes to generating income and ultimately improving people’s life chances. The OECD, for instance, finds that the share of national income taken up by wages declined in 26 of 30 developed countries from 1990-2009. And since capital is heavily concentrated in the hands of a wealthy minority, the more important it is as a source of income the more unequal society becomes. The spread of automation and new robot technologies that displace labour is only set to exacerbate this trend.

But how does capital affect the Power to Create exactly? Take self-employment, one of the best examples of PtC in action. By starting their own business people have the opportunity to turn their ideas into reality (in the form of new products/services), create value for themselves (in the form of income and greater meaning) and support others (in the form of employment). Yet the ability of people to start their own venture is fundamentally tied to capital ownership. As RSA research has recently shown, while the self-employed are happier in their working lives, they are likely to earn less than those in typical employment and be at risk of financial distress – particularly at the outset of their business journey. Ergo, those without the necessary savings and assets to fall back upon will be excluded.

A quick bit of number crunching shows just how important capital ownership can be. Our RSA/Populus survey of self-employed people found that 43 per cent of those who work for themselves own their house outright, which compares to a rate of 33 per cent among the wider population (according to DCLG data). But the figures at the other end of the spectrum are much starker. While 17 per cent of people in the UK are social renters, this was only true of 3 per cent of the business owners who answered our survey. To be sure, we need to be wary of the type of people who are more likely to complete online polls like ours. But at a basic level what this suggests is that going into business is far more feasible for those who have capital to leverage and savings to dip into if things go belly up (which they inevitably will for many).

So capital ownership is clearly important for people’s capacity to realise their ideas. Yet my sense is that it also goes deeper than this to affect mindsets, aspirations and outlooks. The US academic Michael Sherraden argues that holding assets – whether in the form of owning your own home or having stocks and shares to your name – is vital to feeling secure, confident and sure of your own place in the world. In other words, for being a rounded citizen. Indeed, we know that home owners are more likely to volunteer than others. Of course, all of this is hardly new. The republican ideals of property ownership that started with Aristotle and run to the present day have always contended that capital gives people the confidence to assert themselves and defy dominance from oppressive forces. But too often this goes unrecognised.

If we accept that capital is important, how then do we put it into the hands of more people? This question has long been debated by parties across the political spectrum. In the 1930s the Liberal Party adopted the slogan of ‘ownership for all’, and in the late 1950s Labour even considered establishing a state investment fund (akin to a sovereign wealth fund that would distribute the proceeds of state-owned capital throughout the nation). However it was only in the 1980s when capital ownership became politically mainstream. This was the era when Thatcher championed a popular capitalism through Right to Buy, and when the SDP included the establishment of a Citizens’ Trust as official party policy (this would require firms to issue a fraction of their shares each year to a public fund).

Yet since then the debates around capital and a ‘property owning democracy’ have been rather muted. True, Cameron has called for a new ‘popular capitalism’ and stated his ambition of ‘building a nation of shareholders, savers and home-owners’. And likewise, Miliband has spoken of the need for a ‘predistributive’ state that would give people the assets to get ahead in life rather than rely on the state. But neither has developed policies that come anywhere near to tackling the problem. As Stuart White argues, Labour’s debates on predistribution have overwhelmingly focused on education and work (e.g. the Living Wage) to the detriment of any sound thinking on capital ownership. The same is true of the Conservatives, who have only managed to conjure up half-hearted initiatives such as the employee rights-for-shares scheme.

If we’re serious about creating a property-owning democracy – the only way to ensure people have the capacity to shape the world around them – then we need to start talking about the tough and meaty ideas such as inheritance taxes, capital lump sums, sovereign wealth funds and the like. These are the kind of policies that would work some way towards redistributing capital ownership, yet we hear very little of them.

Why? The reason is simple: because the politics of capital is not a politics without enemies. And it is always those who have much to lose that shout the loudest.