Thomas Paine

Thomas Paine
"These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman."

Sunday, 28 August 2011

Global Capitalism - No Trickle Down - But an Upwards Flood!

We have come to a time of significance when an ex Telegraph editor questions whether the left is right about capitalism. Charles Moore followed up his article in the Telegraph with an appearance on Newsnight, where he discussed the impact of the economic policies being pursued by the government.

It is clear that he remains convinced that the over-riding justification for capitalism, for those on lower incomes, is that wealth trickles down to the poorest. However, he acknowledges that, through globalization, this is no longer the case - in truth we now have an 'upwards flood' of wealth to a very small group of obscenely wealthy.

Viewing this purely in terms of capitalism, it can be said that it is an extremely valuable concept in the development of modern civilizations, but it has its limits. When John Sainsbury opened a grocery store in Holborn in 1869 it gave him a way to provide for his family and also supply the local people with, we must presume, good quality provisions at a reasonable price - two admirable outcomes.

As the store grew in popularity more staff were needed, which provided a living for those employed and this increased as the range of products grew. However, the point at which general benefit started to wane was when a second shop was opened. Had this not been the case, we must presume, that a different family would have developed a shop, copying the Sainsbury's innovations, and they instead would have flourished in the new location instead of the Sainsbury family.

Both would have employed local staff, providing livings for these families, but instead of the Sainsbury family becoming increasingly richer than their neighbours, had they stopped at one shop [along with all their competitors] the business of grocery would be one that provided a good living for thousands of families throughout the UK. Also, without the development of 'limited liability' all of these families would have probably remained self-employed people with a ratio of employees to employers of between 1-50 to 1.

Had this been the case it would have reflected the natural grouping of we, Homo sapiens, from our earliest time, for it has been noted by anthropologists that once a group of humans reached around 50 individuals, it divided. It seems that natural leaders occur at around 1 in 50 and that we, as a species, are most comfortable in groups of this size because it appears to be the limit of our capacity for individual relationships. Certainly my experiences as an employee bore this out - organisations employing less than 50 were far more cohesive.

Clearly, for the purpose of distributing food, separately owned shops throughout the land are able to provide this function. In any area, because of capitalism, there would be a handful that were best at this activity and would survive - whilst the worst would go to the wall. However, if this where the case - instead of the members of the Sainsbury's family being fabulously wealthy and the vast majority of families whose main bread winner is its employee, by comparison, being extremely poor - the income of the highest paid working in this industrial sector would probably not be more than four times the lowest - the maximum differential recommended by Plato to avoid civil unrest.

The result of Sainsbury's and the other grocery stores, who have now become global corporations, integrating both vertically and horizontally, is that we have reached a point where they, as with global corporations from other sectors, are more powerful than the governments of nations. From a UK prospectus the government is cowed by these giants and cannot significantly raise the rate of tax on the highest earners or increase corporation tax - the two most obvious measures available for them to redistribute wealth - for fear of them relocating their operations to a country with a more favourable tax regime with a consequential loss of jobs and government income.

It is already becoming clear that the number of global corporations are reducing through the weakest being taken over by the strongest, and it is reasonable to expect if this continues - certainly in the West that there will be, perhaps, less than 100 global corporations who account for virtually all trade and virtually everyone will be their employees. This would lead to just a few percent of the people owning virtually all assets and wealth with just another small section, their key employees and servile politicians, being the few with any noticeable wealth. The nation state would continue to decline in influence in comparison to these global monsters as we have seen recently in the US, as a result of Republican plotting.

Oddly, if things are allowed to continue on this path, we will have, effectively, returned to feudal times. Great estates, not being won through violence, but by economic warfare. If this does occur, we can expect to return to a world of similar inhumane practices for there is no compassion within commerce.

It would not be difficult for a government to start a program to gradually reduce the influence of these corporations - although the longer it is left the more difficult it becomes. However, it would require a political party whose leaders cannot be tempted by offers of wealth and power from these corporations and an electorate who were not bewitched by the dark arts of the advertising industry. The former may be difficult to find, but, as things continue to decline for the majority, an ever increasing number will be demanding action to improve the people's lot - unless they just content themselves with rioting and looting!

1 comment:

  1. Fair point mammoth globalised companies are doing few favours to the west. Have to think of a solution to that without creating protectionism - although sometimes I think we need more of that. Maybe something with VAT - just an idea