Interview: Adair Turner

Adair Turner is being provocative again.

Almost a decade ago now he scandalised bankers and traders (although not the general public) when he declared the work of financiers to be“socially useless”.

A few years ago he made himself almost equally unpopular in central banking circles by suggesting they should consider monetising debt to rebalance their economies.

And now Baron Turner of Ecchinswell’s latest thesis is that politicians, everyone from the Chancellor Philip Hammond down, are talking rubbish about productivity.

“Although what every politician always agrees is that the crucial thing we need to do is speed up the rate of productivity growth – every politician’s wrong!” the silver-haired 63-year old declaims in an interview with The Independent

Turner, whose technocratic career has taken him from the CBI, to the Climate Change Commission, to a major government review of pensions, to the chair of the Financial Services Authority, is now chair of George Soros’ Institute of New Economic Thinking. And the economic thinking he’s doing is certainly “new”. Downright heretical, many would say.

So what’s led him to this radical conclusion that we should stop obsessing about productivity growth? The answer is twofold.

First, he suspects automation is happening quicker than is being picked up by our official GDP statistics. Second, he thinks lots of the new service jobs being created as the mechanisable parts of the economy become more efficient are inherently “zero sum”, meaning they are competing for the distribution of wealth rather than its creation.

He gives an example of street sweepers and lawyers: “If we manage to create a totally effective automated street sweeping machine nobody would have a job as a street sweeper….But if we apply IT to the limit to law, there’ll still be lawyers. It’s just that each of these two highly paid lawyers will now have software that review not simply many cases, but every single case that there’s ever been”.

“What do lawyers do? They fight against each other. If you make lawyer A and lawyer B both much more skilled than they were before you can’t say there’ll be a better product, there’ll just be a more intense fight.”

He thinks that focusing on productivity growth in this context will not help to deliver a higher quality of living for most people. Indeed, he fears it could actually end up harming living standards, citing the example of those who provide social care for the frail elderly.

“What do we do with those jobs at the moment? We reduce their status and their cost. We put them up for competitive bidding. And we bid down the price. And then we do these gig economy games where people being paid to do social care of the elderly aren’t even employed for movement between client one and client two; we say you’re only working when you’re at the client. Then we tailorise their life. We say ‘you’ve got 14 minutes to clean someone’s bottom’…”

The solution, Turner says, banging the desk of his Mayfair office where we are meeting for emphasis, is simply to stop focusing on the bottom line.

“We’ve just got to pay more for social care – we’ve just got to make something which is valued. We’ve got to pay higher taxes to afford it. They’re never going to be high-paid jobs, but we should not be using the techniques of the market to skinny them down.”

He concedes the macroeconomics of his argument, laid out in an extensive lecture in the US earlier this year,is unproven. There are certainly many theoretical and empirical challenges that could be mounted. He also accepts that his thesis that we should focus more on distributing the GDP pie than growing the (measured size of it) will not be easily swallowed by the policymaking classes.

“Ten years ago I said precisely the opposite,” he smiles. “That’s undoubtedly [not] what I would have said when I was director of the CBI. I’m still cautious about leaping to that. But sometimes a useful role in public debate is to throw something deliberately provocative into the pond!”

Turner advises a start-up online bank – OakNorth – which he says has influenced his views on the rapid underlying speed of job-shedding automation.

As chair of a group called Energy Transitions Commission (ETC) group, made up of public and private sector experts and executives, he’s also advising governments in China and India on decarbonisation.

Despite Donald Trump’s withdrawal of the US from the Paris Accords, Turner insists he’s relatively hopefully about the prospects of cracking the problem of a rapidly overheating planet.

“We’re optimistic that there are bits of Indian policy that are heading in the right direction. I’m optimistic that China gets it, that they are determined eventually to bring down their emissions, that they’ll develop renewables on a massive scale, that they’ll electrify their bus fleets etc,” he says.

“The thing that frustrates me about climate change is that we could get to 2060 and we could have a pretty close to zero carbon economy. Run the numbers and it’s completely doable by technologies that we know how to do. It is soluble if we just get on with it.”

But what’s lacking from Turner’s employment portfolio is a major, high-profile, public sector job in the UK. Jeremy Corbyn’s Labour seems an obvious fit. They could use someone with Turner’s economic and establishment credentials.

And it turns out there has been some contact. On 19 May (the same day as the Harry and Meghan Markle’s wedding) Turner was to be found addressing Labour’s macroeconomic conference.

But could he work with a party who many in the business world regard as unreconstructed Marxists, a bigger threat to the economy even than Brexit?

“The answer is I’d have to spend a bit more time,” he says, judiciously. “There are some things about some of the people around them of which I am suspicious. There seem to be some people around then who genuinely do believe that Venezuela is a well-run country. You cannot believe that and be sensible. Venezuela is a disaster and it has been destroyed by a left-wing Marxist government that had oodles of oil revenues. You’ve got to say the way that the world is.”

But he’s certainly not shutting the door.

“There are things that make me wary of that tradition on the left which can see no problems with left-wing governments. On the other hand, there are other aspects of what they are saying that do not seem all that extreme or worrying.”

The supreme British establishment technocrat taking a job with a radical left Labour team? That could be a Turner provocation to put all his others in the shade.

Creating a stakeholder economy may require stick as well as carrot

Twenty-two years ago the leader of the opposition Labour party had a big idea. It was to create a "stakeholder economy" in Britain.

This would be an economy "run for the many, not for the few", he told us. "We [must] shift the emphasis in corporate ethos from the company being a mere vehicle for the capital market to be traded, bought and sold as a commodity, towards a vision of the company as a community or partnership in which each employee has a stake."

But Tony Blair's stakeholder economy was only a sigh on the breeze. New Labour under Blair did plenty of things that irked bosses - from the windfall levy on utilities to the minimum wage - but he never sought to diminish their authority in the boardroom, to curtail their ability to make decisions without consulting rank-and-file workers. As the economist Chris Dillow argues, the inequality of power relations in the workplace was New Labour's great "blind spot".

Fast forward two decades and the shadow chancellor, John McDonnell, is making rather similar noises to those made by Blair all those years ago. "Labour's programme of workplace reform will restore the balance between employer and worker - extending the opportunity for employees to share collectively in the benefits of ownership of their company," he told the TUC conference yesterday.

However, unlike Blair, McDonnell (whose aspirations to replace Jeremy Corbyn are increasingly unconcealed) is prepared to get into some policy specifics. He says that Labour is exploring "ownership funds" for private companies with more than 250 people, where staff would be given shares in their employer, funded by a portion of the firm's profits.

This is similar to a proposal in the report from the IPPR think tank's archbishop-blessed Commission for Economic Justice last week. Indeed, it arguably bears a resemblance to existing government policy. In 2014 the coalition government created a tax incentive for business owners to disperse ownership among staff in Employee Ownership Trusts.

The Institute of Directors suspects Labour's plan would "cross the line between encouragement and coercion". Perhaps they see this as part of McDonnell's self-declared goal of "generally fermenting the overthrow of capitalism" as opposed to gently nudging it in a kindlier direction. But let's park the issue of personalities and concealed agendas and first consider the merits of the policy.

An independent report for the government in 2012 cited evidence showing that employee ownership is associated with reduced absenteeism and happier, more engaged workers. But it's not just nice for the workers. Mutualisation seems to be beneficial to the overall business too, with such companies exhibiting better business performance, more innovation and higher levels of economic resilience. Indeed, the fact is that it has become something of a cross-party political orthodoxy that giving people an ownership stake in the organisations for which they work would be good for the overall economy.

One of David Cameron's early ideas was for "John Lewis-style public services", inspired by the high productivity of the employee-owned department store. The party's 2015 election manifesto promised a "right to mutualise", albeit only in the public sector. In 2012 Nick Clegg called for a "John Lewis economy" and said workers should be given the ability to request shares in the companies in which they work. "We don't believe our problem is too much capitalism: we think it's that too few people have capital," said the then deputy prime minister. Theresa May has not banged the drum for mutuals per se but, at least until the business lobby got to her, she wanted to put workers on boards to "put people back in control".

Given all this, any attempt to paint Labour's ideas on mutual promotion as outrageous, knuckle-headed, 1970s-style socialism, is in danger of failing the laugh test. So the question is not whether mutualisation should be encouraged, but whether it should be given a serious nudge, as Labour seems to be suggesting.

A workforce characterised by increasing levels of part-time working and self-employment may not look like favourable ground for a mutualisation drive. Part of that casualisation trend seems to be driven by company bosses making a national insurance saving by hiring workers as independent contractors rather than conventional employees; one can envisage that kind of practice being curtailed in an environment with greater employee influence.

And the trouble with the dangling carrot approach is, as we have seen, inertia. There has been no discernible proliferation of mutualisation in the years since the government introduced its tax breaks.

While there are lots of mutual friends in theory, often little tends to happen in practice. As with wealth, those with corporate power tend not to be keen on its redistribution. Perhaps if we are to inch closer to that Blairite vision of a stakeholder economy we will need an element of stick after all.