FUNDITS
Some people
still believe that a pot of gold may be found at the end of a rainbow and their
belief is validated by the fact that a few people actually do discover it
there. For most of us, the end of the rainbow simply recedes further and
further from us no matter how relentlessly we chase it, until it vanishes
altogether. But not so for some, and so it is the job of financial pundits – or
fundits, as I call them for short – to encourage those most likely to find the
pots of gold to go on looking. But this task in the present economic climate
can be challenging for them, though fortunately the fundits can afford to ignore
a few things along the way in boostering for the stock market. Which is as well for them.
Thus with
regard to the overwhelming majority of the population who will never reach the
end of the rainbow, let alone find any gold whatsoever, the following may be of
interest:
According to a
new report on Britain by Oxfam, 1% of her population owns almost more than 20
times the total wealth as the poorest fifth: that is, 634,000 of the wealthiest
people against the poorest 13 million. This makes Britain, the world’s sixth
wealthiest economy, one of the most unequal of countries in the developed world. Over half of Britain’s
wealth is concentrated in the hands of the richest 10%, while the poorest 20%
share 0.8% of the wealth between them.
The head of
Oxfam’s UK programme, Rachael Orr: ‘While executive pay soars, one in five
people live below the poverty line and struggle to pay their bills and put food
on the table.’ According to the charity Global Justice Now, corporations make
up 69% of the world’s richest entities. Walmart, for instance, is worth more than
either Spain, the Netherlands or Australia. Three Chinese corporations are
worth more than the entire economy of South Korea. (Morning Star 13.9.16) The top six wealthiest entities are: the USA,
China, Germany, Japan, France and the UK, followed by Italy, Brazil and Canada.
The 10th wealthiest is Walmart. 14th is China’s
electricity monopoly, then China National Petroleum at 15th and the
Chinese (oil) Sinopec Group at 16th. Royal Dutch Shell is 18th,
Exxon Mobile is 21st, Volkswagen 22nd, Toyota 23rd
and Apple a mere 26th. The value of the top ten corporations, at $285 trillion, tops the combined worth,
$280 trillion, of the bottom 180 of
the world’s countries. Global Justice Now ‘blamed governments for bowing to
pressure from multinational firms to promote business-friendly tax regimes
above the needs of their citizens.’ UK government support for TTIP ‘is the
latest example of government help to big business.’ (Guardian 13.9.16) Unite union general secretary Len McCluskey
wrote in the Morning Star for 10.9.16:
‘[In] 2016 our children will be poorer than we are; housing need is just one of
a number of material scandals; pay has yet to recover to its pre-crash value
let alone rise; five million workers are termed self-employed; foodbanks are no
longer an urgent response to an emerging problem but a vital part of our social
fabric. Our NHS is in genuine crisis and all eyes are watching for government
action on Brexit that will not see job prospects and workers’ rights worsen.’
Things do not
appear to be much better in the Land of Opportunity, according to The Guardian for 13.9.16: ‘Desperate US
teenagers turn to sex to work to pay for food’: ‘A Washington-based thinktank,
the Urban Institute, described girls “selling their body” or using “sex for
money” to make ends meet. Boys desperate for food were said to shoplift and
sell drugs.’ Boys and girls trying to avoid the stigma of prostitution provide
sex in return for a hot meal, not for money as such. And food is stolen to feed
whole families, not just the thief. All this information and more besides was
drawn from 10 poor communities across the United States.
But there is
light at the end of the tunnel. According to data collected by Capita Assets
Services, total dividends paid out by the UK’s listed companies since 2000 have
passed £1 trillion, ‘outstripping both inflation and economic growth’. (‘UK
dividends to pass £1 trillion mark’, Daily
Telegraph 7.9.16.) Capita expects the £2 trillion mark ‘to be reached well
within the next decade.’
It’s good news
like this that would appear to inspire the opening remarks by fundit and
business editor Allister Heath when he writes: ‘Karl Marx was wrong: free
markets are wonderful. They have delivered prosperity on an astonishing scale
and helped bind the world together. But their greatest triumph has been their
ability to turn workers into capitalists.’ (Daily
Telegraph 28.8.16)
I begin to fear
that the 13 million people mentioned earlier will not fit easily into this ‘capitalist’
category, nor will workers in Britain in general, I hazard. They participate in capitalism, of course,
and they are certainly the basis for all the wealth just described, but the
nature of their participation is rather different from that of the ‘personifications
of capital’ as such. I wonder if Mr
Heath is making in the above passage the same elision of ‘worker’ and ‘middle
class’ that pertains in the United States, where the term ‘working class’ is verboten and everyone is, in fact, ‘middle
class’. Whether living in a penthouse suite overlooking Central Park or in a
cardboard box somewhere under Brooklyn Bridge.
In another
article (Daily Telegraph 15.9.16)
Heath appears to have a clearer idea of distinction between the two classes in
Britain when he writes of a welfare state ‘that has bailed out the poor’, but
this suggests some shortcomings grasping the reality of any such bailing out
(see above) as well as logical inconsistency: if the market was so ‘wonderful’ (on
28.8.16) why do we have any ‘poor’ at all? That is, in need of bailing out? (Which they aren’t being, anyhow.)
But in fact the
bulk of our fundit’s 28.8.16 article is – gainsaying the optimism of its
opening – pessimistic if not alarmist. For Mr Heath, it turns out, is worried
about ‘savers’, who ‘are facing their greatest challenge since the 1970s.’
Indeed, his article is headlined ‘Cheap money is destroying all our futures and
killing capitalism’!
Of course it
turns out to be our own fault, not capitalism’s, for the problem according to
Heath is that today’s savers ‘now live longer’, which is a shame, really. If
only people could continue to die out when they used to – in their sixties, say
– then the final salary pension plus state aid would have remained sustainable.
So individuals – it serves them right – now have to look to themselves for
long-term survival, ‘and rightly so: the old paternalistic model was always an
aberration, an unsustainable phase of early capitalism.’
In other words,
paternalistic capitalism was a hiccough between the era of the Industrial
Revolution when workers’ self-sufficiency eventually put them in the workhouse,
and the era of today when they have come to depend on foodbanks. A blip, a
provision of basic care which according to our fundit was ‘an aberration’. Fortunately
we have entrepreneurs today like Sir Philip Green to show us just how
unsustainable the final salary pension can be, and indeed how successful late capitalism is.
‘The problem
is,’ continues Heath, ‘that ultra-low interest rates are destroying the
economics of wealth accumulation.’ This will be news to those great wealth
accumulators like Sir Philip and the
even greater Warren Buffett and Carlos Slim. They and those of like magnitude
seem to have no problem with ‘the economics of wealth accumulation’, as is
suggested by the statistics already given, above.
Yet the ‘savers’
whom our fundit is so worried about have been ‘the epitome of the responsible
individualism that underpins all successful democracies.’ But democracy cannot
it seems be all that successful; with ‘gilt yields of 0.5% and inflation at
0.6%, compounding is dead. Real returns are either zero or negative; time is no
longer the saver’s friend.’ Result: ‘Britain’s wealth-owning majority [sic]
will suddenly realise how hard it has become to make money from money.’ Well,
hard for them. It doesn’t appear to
trouble the bulk of hedge funds, which exist and prosper precisely out of
making money from money.
And as the ‘savers’
become aware of this, ‘pain and anger will set in, and there is nothing scarier
than the middle classes on the warpath’. But before dialling 999 it’s worth noting
that: ‘there won’t be a revolution, merely a gradual and dangerous rise in
resentment.’ What a letdown. Suburbia will not go up in flames after all.
Governments and
central banks must, it seems, take much of the blame for low interest rates: ‘their
obsession with pushing down the cost of borrowing has led to a monumental
mispricing of money.’
I am not quite
sure how money can be ‘mispriced’, since it reflects social activity and is
therefore ‘priced’ accordingly. Money by itself has no value at all, as the
Germans of 1923 learned to their cost. The value of money is tied to and goes
up and down with a host of conditions, national and international, political
and economic.
But Heath is on
to something, since ultra-low
interest rates have not of themselves increased borrowing and investing by very
much. These low rates plus quantitative easing are having diminishing positive
effects. On the other hand – as Heath’s fellow Telegraph fundit Jeremy Warner points out in another edition, the
very threat of the Federal Reserve
Board’s raising of rate of interest by even a tiny amount sends shockwaves
throughout the world economies. The problem lies in the mountains of debt
accumulated by governments, individuals, bankers, firms, for all of whom the
slightest rise in the rate of interest would be catastrophic. Whatever the
tenor of Heath’s remarks, the powers-that-be are not wilfully against ordinary ‘savers’.
They’d love to help them. But in the current state of play such ‘savers’ are
the (sometimes) useful idiots who can and must be – disregarded. In a more
civilised way, they are to the capitalist system today what the richer peasants
of 1930s Russia were to Stalin: a necessary sacrifice. Somebody had to go. ‘Savers’
are the least of the world’s problems in a world of heavy borrowers.
And underlying
all of this is the slackness in world demand for both capital and consumer
goods. Read your Baltic Dry, Mr Heath. And this in turn comes down to the rich
monopolising the funds thus freezing out the increasingly large majority of
non-rich who, after all, must in one way or another buy back all that has been
produced if the system is to re-energise and Mr Heath is able to restore any
great confidence in the ‘wonderful’ market. But if the masses cannot, for
purely economic reasons, buy all the stuff back then the answer is that they
should own it already. Mr Heath as a fundit would obviously prefer another
option: ‘It may be, in the end, that we will all [sic] have to contribute twice
as much, saving up to 20 per cent of our incomes across our working life, while
spending less on luxuries, and retiring even later.’ How much later, one wonders? And what does that do for younger-age-group
employment? Indeed, if we save so much, holding back on ‘luxuries’ (i.e. purchases),
where will investment and jobs be then, when nobody is spending much of
anything on anything? At least the financial bods will do all right out of the
pension side of this. As for saving 20%, what do we put it into before we need
it? And who has or will have the 20% to spare?
Our fundit has
indeed picked up on a capitalist malaise of our time but to put his finger on
its root cause – woeful but entirely characteristic and necessary inequality
leading to overproduction and consequent lack of investment (an old, old story)
- he would perforce have to be critical of the market system, which is ‘wonderful’
and of which he is one of its leading liaison officers. So, widen the appeal of
the article (if not narrowing and sharpening the argument) by appealing to ‘all’
of us since his Britain is a mythical realm of sturdy small savers. Alas for
him they are but a minority and by no
means the most important sector in the eyes of those trying to save the world
economy – or these, from the Governor of the Bank of England on down – would have
strained every muscle to do something for them long since. (And there are,
after all, votes in it, at least for the Conservatives and the US Republicans.)
Fundit Mr Heath
seeks some sort of historical resonance for his ‘savers’. Again unfortunately
for him the history of capitalism is littered with the bodies of the ‘little
people’ whom, as Heath says, the Marxists refer to ‘disparagingly’ as the petty
bourgeoisie. Their history is one of secular economic decline against the ever-greater
forces of capital which favour the bigger over the smaller investor and
businessman, a decline leading sooner or later into proletarianisation – and certainly
that of their children, as we see today before our eyes. Fascism of one sort or
another tends to be their protest of choice. Today we have millions
masquerading as ‘self-employed’ because they cannot find jobs. Their situation
is ultimately rather hopeless, so Mr Heath may be right in prognosticating a ‘warpath’
as a result. In that event, will the Daily
Telegraph, the Daily Mail and the
evergreen Nigel Farage (and even Donald Trump) be enough to satisfy them?
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