Moreover, there is a real tradeoff between equality and economic growth, and egalitarianism is not a popular policy even for many low-income people.
In my experience, trade unions are much more interested in wage differentials than in a simple policy of equal pay for all.
These are the core principles that I believe a new progressive political economy should embrace.
I also believe that Western countries that do not adopt this framework and instead cling to a neoliberal political economy, will find it increasingly difficult to innovate and grow.
In the new global economy, which is awash with cheap labor, Western economies will not be able to compete in a “race to the bottom,” with firms seeking ever-cheaper labor, land and capital, and governments seeking to attract them by deregulating and shrinking social benefits.
The only way Western economies will be able to compete and improve their standard of living is by seeing themselves as being involved in a race to the top.
That is, firms must improve their value-added through innovation in existing industries, and by developing the capability to compete in new and more sophisticated industries, where value-added is generally higher.
Companies will be able to do this only if governments abandon the belief that they have no role to play in the economy.
In fact, the state has a key role to play in providing the conditions that enable dynamic companies to innovate and grow.
David Sainsbury, a member of the British House of Lords, served as British minister of science and innovation from 1998 to 2006.
Copyright: Project Syndicate/Institute for Human sciences