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The other day, David Cameron gave a speech on the “Crisis in Capitalism” as has every other ‘Party Leader’ in recent times as they “struggle to explain” just what went wrong with the UK and even the Global Economy in recent times.

The real problem behind all of this may well be, that politicians are confusing the ‘What Happened’ with the previous held “assumptions” based upon class and politics that frankly, no longer apply in any sense at all… the very idea that “Tories are for treading on downtrodden workers” is no more relevant than that Labour are all for “Nationalising everything”, the world has moved on…

The Dichotomy

“David Cameron pledged yesterday to tackle “the crisis of capitalism” but was immediately forced on the defensive over the level of bonus payments at state-funded banks.

The Prime Minister promised to keep a lid on bonuses at the Royal Bank of Scotland and Lloyds Banking Group. Despite his tough language, Stephen Hester, the RBS chief executive, could still be in line for a bonus of about £1m on top of his £1.2m salary.

The RBS board wants to reward Mr Hester for his part in turning the bank around by giving him a windfall of between £1.3m and £1.5m for 2011. But ministers are nervous about the public reaction because RBS was bailed out with £45bn of taxpayers’ money.”

Herein lies the real problem concerning recruitment. We have a failed Bank that the British taxpayer has had to bailout and we need ‘top people’ to lead it “from the shadows to the sun lit uplands”, what is that job worth and might that be different from what the ‘public expect and if so, are they even half right in their expectations ?

In most respects, it is like a ‘second husband’ taking on a woman and her children from her previous marriage and being told “You may not have sex”, which asks the question, why should he take it on in the first place ? The next quote from the same source kind of sums it up rather. If you have an over staffed business with far too many liabilities, you are in most ways, are going to take an axe to it, the short term prospects may not look too good, check this out:

“The bank’s remuneration committee is due to meet next week and a bout of arm-wrestling with the Government looks inevitable. RBS said it was “premature” to speculate and a final decision is expected next month.

Mr Cameron said if there was a bonus for the chief executive it would “be a lot less than it was last year”, when Mr Hester received a £2.4m top-up. A £1m bonus would be controversial because the bank’s share price has fallen by 43 per cent in the past year.”

Another Take

The following is another take from the Telegraph but in most senses, it takes us no further forward:

“Unlike his rivals, David Cameron has no great love of political theory. While Ed Miliband uses political textbooks as holiday companions, Cameron uses them to prop open doors in his Oxfordshire home. He took a first in Politics, Philosophy and Economics at university and learnt enough to know the limitations of all three. In private, he says he is suspicious of anything ending in “-ism” – which is why his speech on capitalism yesterday made so much sense, and identified him as the only party leader who truly understands it.

We have now heard from all three leaders on their definition of capitalism, as if each were entering an essay competition for which the prize was the keys to Number 10. Ed Miliband started it, identifying “predatory capitalism” as an evil which only a Labour government could properly address. Nick Clegg’s offering is a “John Lewis society” of employee ownership, which he says exemplifies Liberal Democrat values. And in the Prime Minister’s speech we can hear the voice of Steve Hilton, his chief strategist, who believes his theory of “social responsibility” has come of age.

Strip away the clichés – everyone wants a competitive economy, no one likes bankers’ bonuses – and each party has a refreshingly distinct agenda, explained by personality as much as politics. The Prime Minister starts from an analysis of what has just happened: a crisis of government, not of capitalism. Labour, he says, borrowed staggering amounts of money in the boom years and the legacy will be with us for decades. Worse, a “Faustian pact” was struck with the banks: rather than regulating them, Gordon Brown entered into coalition with them. It was not light-touch regulation, but wrong-touch regulation: “Small companies were strangled in red tape while the banks were allowed to let rip.”

http://www.telegraph.co.uk/finance/economics/9025231/David-Cameron-is-the-only-party-leader-who-truly-understands-capitalism.html

The Independent Does Ethical Capitalism in an editorial and as usual of “Indy Editorials”, fails to deliver at any level: http://www.independent.co.uk/opinion/leading-articles/leading-article-ethical-capitalism-must-start-with-shareholders-6292036.html

Does Mood Music Work ?

Firstly politicians of all parties should realise that the most essential job that they can do is to set the “mood music” of our times instead of imagining that by their personal actions, they can actually “save the world”.

Secondly and consider this :Once upon a time smoking was considered both normal and unremarkable both at home and in the workplace but the success in reducing smoking in the general population has been wholly due to changing that opinion and previous mindset. Without achieving that, all the ‘smoke free zones and legislation to reinforce that, would not have been possible.

If the “mood” is changed then governments might consider using a carrot and stick approach at both the corporate and the personal level. If in both personal and corporate taxation there are increased taxes but through various ‘concessions’ there are generous claw backs based upon (modified behaviour), to be earned, perhaps that is the way to go.

Such as corporate sponsorship of community directed charitable projects meaning it may be very ‘profitable to the business’ in a reduction in Corporation tax for taking part than not doing so. Beyond that, include higher rate taxpayers being able to claim tax rebates for hours spent working on community projects, with prison sentences for those found cheating on time sheets – of course, “Do the time or in claiming falsely, be found guilty of a crime”.

A blunt instrument perhaps but one that could be used to harness the selfish desires of most human beings to alter their behaviour beneficially.

Going Further

John Rentoul wrote an interesting article on the same theme : http://www.independent.co.uk/opinion/commentators/john-rentoul/john-rentoul-do-you-want-the-market-or-the-market-6292809.html

It was an interesting article and he was quite right to point the finger at us “the people” rather than the politicians as such, we are “conflicted” over the whole topic. I can remember Heath talking about “The unacceptable face of capitalism…” over asset stripping but frankly thought him rather naive and totally disconnected from reality when he said it.

Cameron was right in saying that capitalism has broadly been a force for good and one therefore one has also to accept the “creative destruction” that is inherent in the process. The only thing that politicians of whatever party can do, is to try and devise “incentives” to modify behaviour for the greater good of society and this will generally mean a combination of taxes and relief from those taxes, all pretty clumsy.

In my mind, the real problem is summed up for me by the Alan Sugar programme “The Apprentice” where the prize appears to be a £100,000 pa job. That is wrong, it should be £100k of start up capital for a new small business, in other words, build your own job.

Business Has Moved On

I suspect that Alex Salmond has at the back of his mind the idea to have a very low rate of corporation tax to attract 100s of companies to ‘invest’ in the Scottish economy and thereby creating thousands of jobs, hurrah, hurrah for Alex ! Fucking Muppet.

If so, it is a nonsense because those days are long gone. “Big Business” right across the Globe has and will continue to shed jobs until they consist of very few staff but have the expertise to know routes to market and the ability to raise the capital to fund the development which is then done by smaller companies. The model is well established in Pharmaceuticals, Advertising and even motor manufacturing has been going that way for decades.

The future lies in small businesses which even today provide far more employment than large organisations so, we also need to refocus our thinking from just the “Fat Cat” stereotype and focus on training, encouraging and give incentives to small businesses because that is where the future lies for the UK economy. In order to balance out the excesses of Big Business, we do need to encourage “a nation of shopkeepers” that is not owned by them.