Pro-market, pro-business, or just pro-wealth?

This, rather good, post from Simon Wren-Lewis brings up what has become a trope – the distinction between people who are “pro-market” and those who are “merely pro-business”. The idea is that some people believe that economic problems are best solved through the market mechanism, while some other people pretend to believe this but actually just represent the business lobby. Businesses frequently want protectionist restrictions on their competitors, state subsidies or tax-breaks, or permission to establish a monopoly, all of which are devices to circumvent the market.

I think there is another, more relevant, group involved – those who pretend to be either “pro-market” or “pro-business” but in fact are just “pro-wealth”, lobbyists for the rich independent of industry. The distinction is extremely important. If you represent a business lobby you usually want growth, and you can put up with some inflation. If you think there should be more markets you can think what you like about macro-economics, because what you care about is micro. If you are a lobbyist for previously acquired wealth, though, you love deflation, hate inflation and taxes, and you don’t care much about growth because your clients are already rich. In Piketty logic, the point is keeping r < g, and pushing down g is as good as pushing up r to that end. Also, to grow is to change, and nobody fears change as much as the wealthy. This explains quite a lot. Faisal Islam was on the twitters earlier being astonished that Tory MPs and even cabinet ministers exist who define the Confederation of British Industry, and further, HM Treasury, as their enemy.

Seen through the pro-business/pro-wealth prism, this makes a lot of sense. Philip Hammond is pro-business; Jacob Rees-Mogg is pro-wealth. In a more diffuse way, politicians who suck up to well-off pensioners in swing constituencies are also being drawn towards the wealth camp. Hammond therefore worries about classically corporate concerns like the free movement of trade. Rees-Mogg don’t care because he has no interest in managing Jaguar-Land Rover and he can still afford to buy one even if the parts have to queue at Dover. Conservatives who are actually pro-business, or indeed pro-market, feel the gravitational pull of Remain. Conservatives who are pro-wealth are free to pursue whatever fantasies they can come up with so long as they do not involve taxing the wealthy, inflating their wealth away, or raising up the rest through growth.

This dovetails nicely with my post on the rise of the eccentric billionaire and the concomitant decline of chamber-of-commerce Toryism. Eccentric billionaires are, by definition, wealthy and ones who choose politics as a form of sport probably aren’t managing an active business. In the aggregate they tend to call a pro-wealth political constituency into existence.

An interesting consequence in this is that we should see a distinction between different financial professions in where they end up if they go into politics. You’d expect bankers to be pro-business/pro-market and wealth managers to be pro-wealth. And that’s roughly what we do see. Rees-Mogg is an ex-fund manager, Emmanuel Macron is an ex-banker. Nigel Farage is an ex-stockbroker, but then his material constituency is of course Nigel Farage. I’m an analyst; nobody cares what I think.

9 Comments on "Pro-market, pro-business, or just pro-wealth?"

  1. Minor technical point: Farage is always referred to as a stockbroker but he actually traded commodities on the London Metals Exchange. Makes a difference because his clients wouldn’t have been rich individuals for the most part.


    1. “Pro-wealth” is an alternative way of saying “pro-rentier”: could Farage’s view of the world have been influenced by the resource-owning oligarchs he will no doubt have encountered during his career as a commodity trader?


      1. Alternatively, if he was mostly buy-side, his clients would have been random industrial companies. And it certainly isn’t impossible that his thinking is dominated by cranky West Midlands small business types…


    2. Worth remembering that he also wasn’t a very good commodities trader, so may have developed non-standard views by comparison to better ones.


  2. One of the disappointments about the brexit nonsense is that some of us thought the City and various big business people would persuade the tories to avoid hard brexit. Instead, the wealth people and authoritarian nationalists and opportunists seem to be driving things along and ignoring all the actual business people they otherwise claim to venerate.
    Naturally, in an international capitalist system said business people can take their ball and move elsewhere, and many will.


  3. Commentary on American politics has long noted the resistance of elderly retiree incomers to vote for tax rises to fund local schools, because why would they? They have no connection to the community they live in and only there because that’s where they could afford to retire, they don’t want to pay more in property tax than they need to, their home is their prime asset and source of wealth. This strikes me as a miniature version of the phenomenon involved here. And in the UK rn there are plenty of pensioners, who because of the nature of the property market have plenty of wealth but not much income, in a similar situation.

    This gives me an opportunity to boost something I sort of wrote about this before:


  4. Great post. I’ve thought for a while that an important change within the Conservative Party is that its funding has shifted away from industry towards finance. Hadn’t really thought about the distinction between types of finance though.
    Interesting too that from the asset management industry most of the money (with the exception of Fidelity) comes from hedge funds rather than the big players.


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