The Future Now

Cake and eat it capitalism

This piece by Larry Elliott in yesterday's Guardian on the nationalisation of Freddie Mac and Fannie Mae perfectly describes the hypocrisy of the current economic system, and those who support it.

As Elliot says,

If ever there was a time to bring in controls on the ability of banks to create unlimited amounts of credit, to restrict the more toxic forms of derivatives, to rein in the activities of hedge funds, to insist that remuneration structures are not biased in favour of reckless speculation, and to use anti-trust law to break up the power of the big institutions then this, surely, is it.

But as he correctly points out, no one, from Gordon Brown to Barack Obama is making the right noises.  Surely we can't let the interests of elite wealth and privilege off the hook again, while taxpayers pick up the tab?

ps: for anyone who, like me, intensely dislikes the use of ghastly American nicknames to describe some of the largest financial institutions in the world, their real names are: the Federal Home Loan Mortgage Corporation (Freddie) and Federal National Mortgage Association (Fannie).

Who really governs?

The consistently excellent Prem Sikka has this piece over at Comment is Free this afternoon, in which laments the current state of democracy and the rising power of corporations:

As he concludes,

The taxation debate is indicative of a deepening crisis of democracy. Public confidence in parliamentary democracy will continue to be eroded until the power of corporations is checked. Normal people pay a large share of their income in taxes, but the political structures are unduly influenced by corporations and their controllers. They seem to enjoy representation with little or no taxation. The choice is clear: we can have either democracy and public accountability or rampant corporate power with enormous private wealth and power concentrated in the hands of a few business executives, but not both.

Never a truer word ....

Are the kids alright?

Alice Miles had a very good piece in the Times this week, prompted by the Children's Society Report into how children are being harmed by relentless exposure to advertising.  She asks,

...why is it in a child's interests to be treated like a consumer? It has yet to be proven that giving even adults a wide range of choices improves their lives.

Further to my previous post about the importance of finding a viable strategy for bringing about social change, one thing we can be sure of is that the future depends almost entirely on the values, perceptions and attitudes of the current generation of children.

What Miles' piece makes abundantly clear, is that the social and cultural enivoronment in which our kids are growing up today is quite different from the world we (Alice land I are both in our forties) inhabited as youngsters.  And this is bound to have an impact on the kind of adults they turn into.   

Already, too few adults are aware of, or care about, the commercialisation of culture and its impact on people's lives.  Given the messages now being pumped into malleable young minds, we can be reasonably sure that, as adults, their generation will be even less aware of the links between increasing consumerism, people's psychological and spiritual wellbeing, and the wider impact on society and the prospects for building a more just and inclusive global order, than most people are today.

There is so much evidence that ever-increasing consumer choice does not lead to increased psychological wellbeing or happiness.  It is, however, the only way our dysfunctional economy can sustain itself, and therein lies the problem.

Profits before people

No great surprise to learn this morning, that British Gas made record profits in the last year; a year in which consumers have faced massive hikes in their energy bills.

It's an old trick that firms have been indulging in since the industrial revolution: put your prices up as soon as raw material costs start to rise and add a bit extra on, to offset (largely mythical) additional overheads.  Then, when wholesale prices start to fall again, take as much time as you like in passing the falling costs to the customer. 

All big corporations do it, and as utility providers, like gas companies, although now privatised, still operate largely under the conditions of a monopoly and are not really subject to the competitive rigours of the market, they get away with it.

As I have written elsewhere, this is one of myriad ways in which large corporations operating under the benign conditions of deregulated marekts, ensure the balance of wealth is tipped continually in favour of the already wealthy (shareholders and senior management) and against the vast majority of their stakeholders (customers and staff).

If you want to go well ...

... be sure to go Shell.  That was the slogan used by Shell for a TV advertising campaign back in the 1970s.  Doubtless some of you, like me, will be able to recall the tune.

Today the slogan applies more to Shell's shareholders, and its very well remunerated senior executives, than to its principal stakeholders: its customers.

While forecourt prices have been driven up by the relentless rise is the price of crude oil, Shell has reported record profits for a British company of £13.9 billion.

A while ago, when British Gas reported massive profits, I wrote a piece in which I argued that the excessive profits of large corporations while consumer prices were rising is clear evidence that the business model that underpins current economic arrangements inevitably leads to a transfer of wealth from those who have relatively little to those who have plenty.

Think about it.  Fuel prices go up much faster than the wages of most drivers.  Shell's profits, and therefore its dividends to shareholders go through the roof.  The company has many more customers than shareholders (and most of those customers cannot afford to become shareholders) therefore shareholders are getting richer at the expense of customers.

British Union leader Tony Woodley has called for a windfall tax on such profits.  I think we should go further, instead of imposing windfall taxes when profits pass some subjective measure of excess, we should base tax policy on a recognition that oil reserves are a gift of nature.  The distribution of the wealth derived from their exploitation should reflect this and be spread among all citizens, not disproportionately in favour a minority of the already wealthy.

A large proportion of Shell's profits arise because oil companies are allowed cheap and sometimes free access to oil reserves when they should be paying the rest of us for the privilege.  Of course the company's ingenuity and investment should be rewarded, but not at this level, and not when the rest of us are facing higher prices and reduced pay awards.

Oxfam at Davos

Barbara Stocking, Chief Exec of Oxfam, has a brave piece at comment is free.  She defends the presence of Oxfam at the World Economic Forum in Davos, arguing that

For every selfish capitalist, there is an enlightened businessperson inspired by the challenge of global poverty and committed to changing the way they operate to help end it. They are important not solely because they care, but because many of them in are in positions of significant influence and can therefore do something about it.

It's a difficult one, for while Ms Stocking may have some very productive conversations with some of the attendees, and may well obtain support or sponsorship for some of Oxfam's initiatives and projects in the developing world, she is not likely to persuade anyone that the problems of the poor world are a direct consequence of the way in which the global economy is structured. 

And it is the structure of the economy that has enabled those who go to Davos to make their fortunes.  I'm not saying the poor are poor because the rich are rich, only that under the current system, the means by which the rich get rich necessarily reduce the life chances of those at the bottom, be they in rich countries or poor ones.

There is a rapidly growing band of African millionaires, but this has led to no change in the situation of most Africans, and nor will it.

When it comes to poverty alleviation, there are two options:  Allow a minority to exploit an unjust system, and then lobby for them to give a share of their wealth to reduce poverty, as Bill Gates, Warren Buffet and George Soros have done very generously.  Or, arrange things so that the disadvantaged have a fair chance in life and can access the means to their own economic security.  This would permanently reduce the amount of suffering in the world, whereas charitable aid often amounts to little more than short-term sticking plaster.

Ms Stocking is in a difficult position.  If she spent her time attacking the means by which the wealthy get rich, she probably wouldn't be invited to Davos.  But it is to be hoped that organisations like Oxfam remember the true roots of poverty, and don't just settle for crumbs from the tables of the rich and powerful.