Given Britain’s economic situation, an incomes policy must form an implicit or explicit part of any Government’s economic programme. Its modalities and limits are of utmost importance to all socialists. The options are simple: on the one hand, the Government can confine its attempts to the effective production of a wages freeze which is masked by anodyne appeals for dividend restraint and capital (gains) accumulation. This would require a direct confrontation with the unions, and pose the delicate problem of ensuring that each union is dealt with separately, and that judicious minor concessions are made to particular union leaders at particular moments. On the other hand, the only incomes policy that a socialist can support is one within the framework of a more general plan, incorporating both a reversal of the redistribution of wealth to the wealthier which took place in the 1950’s, and the real control of salaries, profits, dividends, capital gains and fringe benefits—a control which is as real, and is seen to be as real, as the control over money wages.
This requires a very far-reaching transformation of the fiscal and accounting system. Titmuss’ important Income Redistribution and Social Change has demonstrated so conclusively the inadequacy and irrelevance of present statistics and taxes on the distribution of real personal wealth to the wealthier classes that no action directed towards an incomes policy and wealth control can be taken seriously which does not involve such a change.
A central part of any incomes policy being the adequate assessment of profits
At the level of high economic principle, the author reminds us, economic resources are most efficiently used if they are constantly being redistributed to the most profitable enterprises. ‘A free economy operates through the spontaneous attraction of resources to the points of highest productivity, using the mechanism of markets and prices’. One of the preconditions of perfectly competitive markets is perfect knowledge of the relative profitability of alternative uses of capital.
It is Rose’s contention that ‘in the absence of legal compulsion . . . the extent of (voluntary) disclosure would probably be much less than that required to steer real resources to the points of highest prospective return’. Why? ‘The reason for this presumption is to be found in the . . . separation of ownership and management’. Categorizing the ‘entrepreneur’ as a ‘hybrid and abstract figure of owner-cum-manger’, the author takes the position of the actual or prospective shareholder and points out that the evidence of the real world suggests that ‘managers who are not owners may seek to maximize their own longterm income rather than that of their company’s shareholders’. ‘The most frequent form of mismanagement’, Rose continues, ‘is that of inefficiency in the relative sense, especially in the use by directors of the shareholders’ funds on projects from which the rate of return is unduly low’; and in this sense, the interest of the community is identical with that of shareholders ‘looking for a maximum rate of return on their investments.’