Wednesday, November 02, 2011

A kinder, gentler capitalism?

I bought the Financial Times today to read Rowan Williams' article and found beneath it an excellent piece by John Kay which you can read on the veteran economist's own website here.

I especially warmed to his sentiment that many people agree with the protest at St Paul's but few with what the protesters actually say. The reason for this is that we all think something's wrong but can't quite put our finger on what it is. He suggests the following:

'The incoherence results from a political void. Europe’s political left lacks any convincing narrative in the post-socialist world. The right tells a story in which greed is the dominant human motivation, government an incubus on the spirit of free enterprise. News “from the markets” is not of new products and services, but of the fluctuations of the FTSE. This rhetoric views doctors and teachers as parasites, not producers, and has provided cover for an unhealthy expansion of the influence of established large corporations.'

I think he might be on to something here. I was reading this as I listened to the World at One discuss the latest manoeuvres in the public sector pension wrangle. I found myself wondering why we are caught up in a race to the bottom; why the task seems to be to leave everyone without a pension. A number of experts were saying that the public sector workers need to realise that their private sector counterparts have virtually no guaranteed pension, so they should accept the same fate. The upshot of this, of course, is that the state picks up all our bills for retirement.

So how about changing company law to say that instead of maximising share holder value and ensuring that board directors retain their gold-plated pensions, companies have a legal obligation to invest in the retirements of all the people who have contributed to them making profits. If people are enriched by the labour of others, they should contribute to those people's well-being by paying them a salary and contributing to a pension for when they retire.

Further, all pensions should be set at what is needed for a person to live on when most of their major costs have been met (ie housing, school fees, two cars, etc). No one needs a pension of £750,000 a year and no one should be expected to make do with one of £7,500 a year.

And how about companies being legally obliged to maximise innovation and invention, quality in manufacturing, sustainability in investment and the use of resources? Then the news from the FTSE would not be about share prices and PE ratios but about new products and services that were genuinely adding value to society as well as company balance sheets.

John Kay argues that no one wants an end to capitalism; they just want a capitalism that is not about greed and gambling. I think we can all say 'amen' to that. As Rowan Williams points out, it is not just protesters who think the Robin Hood Tax is a good idea; Bill Gates and George Soros are supporters - neither men noted for their left-leaning sympathies.

What is becoming clear is that there is a growing chorus of voices saying that the false choice between austerity and bankruptcy needs to be replaced by a sensible conversation about how we can order our society, including the important financial sector, in such a way that everyone benefits and not just a few ridiculously rich people at the top of the pile.

It all sounds like motherhood and apple pie, I know. But of course mums are essential to the good ordering of society and apple pie fuels many a good conversation and fills a belly in a most agreeable way. So what exactly is wrong with that?

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