Back in 1973, the then UK prime minister Edward Heath condemned what he called the “unpleasant and unacceptable face of capitalism”. Heath was referring to the bribery and corruption conducted by the then head of a leading British company, Lonrho. This condemnatory term for capitalism metamorphosed into the “ugly face of capitalism” during the first great worldwide capitalist slump of 1974-5, which led to the decimation of Britain’s manufacturing and mining industry. In the aftermath of the recession, several financial companies sprang up to buy manufacturing enterprises and asset-strip them before selling them on or closing them down. It led to tens of thousands of job losses. Heath was forced to condemn this practice as “ugly”. Of course, it made no difference. This cleansing process is necessary under the capitalist cycle of boom and slump. Indeed, asset stripping became very acceptable in the ‘neo-liberal’ era that followed, with so-called private equity firms like Mitt Romney’s Bain Capital raising funds to do just the same thing: stripping assets and supposedly making failing or low profit businesses ‘more efficient’ i.e. profitable.
Now the current UK prime minister David Cameron has announced today that he wants no part of what he describes as the “irresponsible capitalism” that contributed to the Great Recession. Instead, he espoused a “popular capitalism” that should allow “everyone to share in the success of the market” and criticised an “out of control” bonus culture in the City. He wanted to encourage firms to show “social responsibility”. ‘Popular capitalism’ was based on two principles: “The first is a vision of social responsibility, which recognises that people are not just atomised individuals, and that companies have obligations too. And the second is a genuinely popular capitalism, which allows everyone to share in the success of the market.” Cameron said that “where they work properly (assumption made here, I think!), open markets and free enterprise can actually promote morality” by creating “a direct link between contribution and reward; between effort and outcome”. So we should use this crisis of capitalism to improve markets, not undermine them, because I believe that out of this current adversity we can build a better economy, one that is truly fair and worthwhile.”
Cameron argued that social responsibility must be just an important objective of corporations as profit maximisation. This is a step away from the statements of that hero of British conservatism and the free market, Margaret Thatcher, who infamously said that there was “no society” and therefore no social responsibility to be adopted by companies or individuals alike. This was the ‘pure’ ideology of capital, asserted by the likes of the American philosopher, Ayn Rand. Rand said the individual should “exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself… there was virtue in selfishness rather than altruism”. Rand’s ideas were widely acclaimed by the likes of Alan Greenspan, head of the US Fed during the great credit boom. Then “greed is good’ was the aphorism of the fictional Gordon Gekko in the film, Wall Street. But now, apparently, greed, huge salaries and bonuses and asset stripping are ugly, irresponsible and above all, not popular.
Ironically, the ideological father of the ‘free market’, the Scottish enlightenment figure, Adam Smith, never espoused profit maximisation alone. On the contrary, he thought that capitalism could only flourish on moral principles. He reckoned that both self-interest and regard for others were natural in homo sapiens. So he had the utopian belief that a ‘free market’ for trade would generate both a profitable and moral life for all. In this vein, 250 years later, we get the grotesque ideology of Lloyd Blankfein , the CEO of Goldman Sachs, the great vampire squid of finance capital, who proclaims that he and his investment bank are doing “God’s work” (see my post, Doing God’s work, 19 April 2010)! GS is a representative of God, it seems. Unfortunately, God seems to want to have very large salaries, bonuses and pensions, while engaging in nefarious financial tricks and trying (successfully) to evade tax.
And even after the banking crash, it’s business as usual. Goldman Sachs had a bad 2011 doing God’s work. Profits fell sharply to $28.8bn in 2011 and ’employee compensation’ dropped 21% to $12.2bn from $15.4bn in 2010. But that meant employee compensation as a share of profits actually rose from 39.3% in 2010 to 42.4% in 2011, even though the workforce was 7% smaller! More money to fewer people after making less profit. God’s largesse. It’s the same story with the large UK banks that are now state-owned. The 83% taxpayer-owned RBS is set to pay its chief executive Stephen Hester a bonus of £1m on top of his £1.2m salary, while the man who brought RBS to its knees, the former chief executive, Sir Reg Goodwin (knighted for his services to the banking community) is still set to pick up his huge pension entitlements (£700,000-plus a year).
The opposition Labour party in Britain has also taken a principled stand on these issues. After the financial collapse, Peter Mandelson, then business secretary, attacked the CEO of Barclays Bank, the American Bob Diamond as the “unacceptable face of banking” for taking a huge salary and bonus at the time of crisis. This is the same Peter Mandelson who at the height of the neo-liberal boom back in 1998, embraced ‘greed’ as a force for good, declaring he was “intensely relaxed about people getting filthy rich as long they paid their taxes”. Well, both those relaxations have not proved to be a force for good.
The current Labour leader, Ed Miliband, has joined Cameron in condemning “irresponsible capitalism”, implying, of course, that there is a responsible version. Being responsible for capitalists means paying their taxes and not taking such big wage packets, but apparently the rest of us also have to be responsible under responsible capitalism. That means accepting the draconian fiscal austerity being imposed by the government on public sector jobs, wages and social benefits to meet the needs of the bankers. The Labour leader has signed up to this policy for the life of this parliament and beyond and even proposed going further in saying that perhaps those in work should take a pay cut to keep others in jobs. Now that really is responsible capitalism. Miliband’s finance spokesperson Ed Balls has also backed this call for workers to be responsible for the crisis caused by the bankers by accepting pay cuts and job losses. This is the same Ed Balls who back in 2007 said that ‘light touch regulation’ of the City of Lonfon was the way forward and any attempt to curb the free activities of the likes of Lloyd Blankfein was wrong.
So there we have it. What we need is beautiful or pleasant (not ugly or unpleasant) capitalism; or moral (not immoral) capitalism; or godly (not ungodly) capitalism; fair (not predatory or crony) capitalism; and now responsible (not irresponsible) capitalism. But apparently, we still need capitalism.