Capitalism can’t just be about money
“So what do you reckon about the protests?”
“The occupation of the front doorstep of St. Paul’s Cathedral, you mean?”
“No, that’s a sideshow.”
“I hear you. Amazing the amount of fuss the media can make about a few people with tents, isn’t it?”
“Exactly. I’m talking about the issues, here.”
“Quite so. Well, I think we should overthrow capitalism and replace it with something nicer.”
“Don’t be daft. That’s the problem with this movement: no coherent proposals and no practical alternative to capitalism. Hello? Where were you when the Berlin Wall came down?”
“You’re the one who’s being daft. This is a false dilemma: schoolboy debating tactics. You’re trying to imply that either we swallow the existing system whole, or we stand shoulder to shoulder with Joseph Stalin. Well I’m not buying that.”
“You were the one who said he wanted to overthrow capitalism.”
“OK, I may have exaggerated for comic effect. But one of the problems is “capitalism” is pretty poorly defined, isn’t it?”
“I know capitalism when I see it.”
“Do you? Every successful economy in the world is a mixed economy: market forces plus hefty doses of government spending, redistribution and regulation. Plenty of room for sensible argument about how those mixtures should vary.”
“All horribly reasonable. It sounds like an attempt to distract from the fact that the rich aren’t paying their fair share of tax.”
“Aha, the 1 per cent, you mean?”
“Exactly, the 1 per cent.”
“How much tax do you think they should pay?”
“Um – well, more.”
“More than what?”
“More than they are doing now!”
“How much do you think they are paying now?”
“Well, not enough.”
“We’re going in circles here. We’ve established that you’d like the rich to pay more than a quantity of tax which you admit is entirely unknown to you. It’s 27.7 per cent, by the way.”
“What is?”
“The percentage of income tax paid by the top 1 per cent of earners in the UK. It’s 27.7 per cent. I looked it up. It’s on the revenue and customs website. It’s a little fact you might find useful next time you get into a discussion about whether it should be more than that.”
“Let’s go back to this something nicer business.”
“I’ve got a five point plan. Number one is more meaningful equality of opportunity. Left-wingers have been too interested in making sure people who make very different choices end up with similar amounts of money. Right-wingers have been too glib about levelling the playing field and accepting whatever outcome the market produces. We need much more attention to the quality of nurseries and schools.”
“More easily said than done.”
“Isn’t everything? Number two, raise more taxes from environmentally damaging activities. For some reason we seem to have decided that jet fuel and domestic heating deserve a tax break, yet simply being rich is regarded as the most profound of pollutants.”
“What about the banks? They’ve been doing toxic things.”
“They have, but the idea that the cause of the crisis was simply fat cat bankers is juvenile. The financial system – its regulations, risk management and ethics – is profoundly flawed. Fixing those flaws is a hugely technical problem as well as a political one. Fighting the banking lobby is going to be necessary but not sufficient. And that’s point three.”
“Point four?”
“We need to pay serious attention to our innovation system. Patents are useful in some circumstances but seem to be distorting the computing industry. There is far too little attention being paid to ideas that really matter, such as low-carbon technology or antibiotics.”
“And point five?”
“Point five is the most ambitious of all. We need a cultural shift in parts of business. Capitalism can’t just be about trying to make money – that’s the ethics of a used car salesman or a drug dealer. Capitalism has to involve a sense of creativity, boldness and pride in a job well done. The most successful companies have usually had this and many still do – from Apple to Brompton to Zipcar – but many financial companies seem to have long ago abandoned them.”
“None of this quite amounts to the overthrow of capitalism, does it?”
“No. I think it’s going to be rather more difficult than that – and a lot more useful.”
Also published at ft.com.
22 Comments
Andy Williamson says:
Exactly.
A couple specifics that I’d add to the list above:
- make directors and shareholders explicitly able (even require them) to make decisions with the long-term interests of all stakeholders in mind (customers, employees, neighbours, the next generations, all affected by their business) even if that has the effect of reducing this quarter/year’s bottom line or share price
- remove the ability of private banks to create money from nothing with interest as advocated by http://www.positivemoney.org.uk/ (or explain the flaws in their proposals – so far I’ve seen nobody seriously do that)
5th of November, 2011clarke ching says:
27.7%
I did not know that!
Nice article Tim.
5th of November, 2011Rob Wilard says:
If the richest 1% are paying 27.7% of their income in tax and the government is spending about 45% of GDP there’s an even bigger problem than I thought! The truth is: you’ve swallowed HMRC’s propaganda hook line and sinker. You’re better than that, usually!
5th of November, 2011No, the real problem is staring us in the face. On the one hand government economics are based on a growth percentage, i.e. an assumption of exponential growth. On the other hand we’ve reached the capacity of some of the world’s resources and the same governments that are preparing their budgets based on growth are arguing, and legislating, for that growth to stop. Spot a problem here? Solution? Require government to prepare its budgets on a steady state basis. No PhD or Nobel prize required. Simply good old common sense.
Andreas Tirez says:
More attention to nurseries and schools: quite right! Social mobility should go up. Of I may suggest some academic litereature: according to research of J Heckman the dismal
5th of November, 2011Hamish Atkinson says:
Before we define capitalism, perhaps we need to reevaluate money? What is money? When I do a month’s work and then my employer transfers my salary into my UK bank account, what does that actually mean?
When the Bank of England uses “Quantitative Easing” to make new money, what does that mean? What difference does it make to the meaning of money in my bank account? Alternatively if my bank account is overdrawn, or I have a mortgage or credit card balance, what difference does that make to the meaning of my debt?
These questions might seem elementary to anyone that has studied Economics, but I bet the bulk of the people protesting about capitalism haven’t even considered them, let alone the 99%…
As Tim pointed out in a previous column, you can’t have a credit balance without someone having a debt. Obviously the trigger for the protests is the huge amount of debt most of the liberal Western “capitalist” economies have racked up (personal, business and state debt).
But whats does that debt mean? Who do we owe it to? How come we have got in a position where we all collectively owe someone all that money?
Presumably, collectively the people that we owe it to have done something for us, and we haven’t returned the favour. What was that? Did we spend it on getting fat, on handbags and cars, on the houses we live in, or on our childrens’ education?
Let’s get some perspective of how “capitalism” got us here. Then maybe we can start redefining capitalism to be what we (the 99%) want it to be in future, to achieve our goals for a less volatile, more equitable future.
5th of November, 2011Dom Camus says:
@Hamish – What the debt means is one of the few things we can answer. It means that we have been enjoying a standard of living higher than we could afford. Unfortunately (see, for example, Greece) people don’t much like the idea of being poorer than they thought!
5th of November, 2011Liam Tate says:
5 minute video:
A Beginners Guide to ‘Occupy’ vimeo.com/31489386
Fair? Balanced?
5th of November, 2011Ralph Lucas says:
From an ordinary person’s point of view the problem is not Capitalism – in the sense of the capture of productive output by capital – but the opposite – that the return which capital should have has been captured by managers, fund managers, bankers and taxmen to the point where the remaining return is far outweighed by the risks, none of which have been captured. A rational man, in these circumstances, borrows all he can and saves nothing. That way at least he has fun: the penury he gets either way.
5th of November, 2011CM says:
Thank you.
“. Capitalism can’t just be about trying to make money – that’s the ethics of a used car salesman or a drug dealer. Capitalism has to involve a sense of creativity, boldness and pride in a job well done.”
This is definitely the most “right on” phrase I have read this past year.
5th of November, 2011Nathan Baum says:
Re. 27.7 percent. Did you use the figures at http://www.hmrc.gov.uk/stats/income_distribution/menu-by-year.htm to calculate this?
5th of November, 2011Pamsk says:
Does that 27% include Mrs Philip Green and the billion she is paid in Monte Carlo?
5th of November, 2011Andrew Kevin says:
Nice essay. One might add that those saying “the rich should pay more,” without any idea of how MUCH more, are more than matched by the rich who relentlessly say “the rich should pay less!”, and who in the USA have had tax cuts in several of the last 10 years, but without ever specifying how MUCH less. When does it end for them?
5th of November, 2011kupret says:
I don’t think it’s about paying more taxes only, but it’s about how they control the government. Look what they’ve been done to the economy (the executives), but still they own the company, since the gov of US never want to take over the company. They just don’t want to use the ‘N’ word: Nationalization (of the company). But still, gov throw federal money to bail out the bankrupt company.
6th of November, 2011Jolyon Maugham says:
Someone’s gotta kick start the conversation about what needs to change somewhere. I’d like measures to see measures to advance generational equity… wealth taxes instead of capital gains and/or inheritance taxes might be a good place to start.
Small niggle on 27.7% of INCOME tax… Wealth is a measure of capital not income. What is the percentage of the total tax take paid by the richest 1%?
7th of November, 2011Binky says:
Kind of glosses right over the problems of regulatory capture, control fraud, and who owns the control system with which the zeitgeist is steered.
7th of November, 2011Gerard McGlew says:
In http://www.hmrc.gov.uk/stats/income_tax/liabilities-january2011.pdf page 25, I read that for 2010-2011, I read that the top 1% of earners were expected to pay 26.6% of HMRC’s total income.
7th of November, 2011What is the source for the 27.7?
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Hi Gerald – It’s the next line down, the estimate for 2011-2012. http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf. On reflection 2010-2011 would have been the better estimate to provide. Thanks – Tim H.
Tim says:
What proportion of GDP represents newly value; and testingly, what proportion of GDP is the profit in, at best, zero sum dealings?
8th of November, 2011Tim says:
What proportion of GDP represents newly created value; and testingly, what proportion of GDP is the profit from, at best, zero sum dealings?
8th of November, 2011Favabank (John Durrant) says:
I feel that ‘statism’ is the paradigm that should be under scrutiny, rather than capitalism. What we actually experience is within our nation states is a mix of capitalism & socialism. Capitalism becomes conflated with free market economics & people take stands without a central point of reference, without common agreement on what capitalism actually is.
We tend not to see the influence of statism on every aspect of our lives and instead attack its consequences. The state / banking system has a monopolistic control over the supply of money. If the supply of money itself was able to operate under free market conditions then ‘money’ may evolve into new form altogether. Certainly the mathematical and physical impossibility of the requirement for continual growth is something that might be designed out of the money system if its control was relinquished from statist systems…
Just some thoughts…
9th of November, 2011Alex B says:
@Andy Williamson
I agree in principle with the sentiment that companies should act in the /long-term/ interests of their shareholders, even if that’s at the expense of their short-term interests. It is a bit woolly, though, and could be used to excuse a multitude of sins.
As far as Positive Money’s proposals go, read CJ and Thalia’s critical comments on http://www.positivemoney.org.uk/our-proposals/. I don’t believe PM will help the people its proponents claim to be helping, and it may have many other negative side-effects.
@Rob Wilard The 1% aren’t paying 27.7% of /their/ income in tax, they’re paying 27.7% of all income tax received by HMRC. See http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf . The top 50% is paying 89.7% of income tax received by HMRC, and the top 10% is paying 57.6%. Anyone who claims that the UK does not have a system of progressive income taxation is lying or uninformed. Whether it’s progressive /enough/ or not is a meaningful debate. Likewise whether overall taxation (including capital gains, inheritance, VAT, NI, duties, etc) is progressive enough, and how mobile people are from the bottom 50% into the top 50%, 25%, 10% or 1%.
9th of November, 2011howard says:
A discussion about capitalism is meaningless without mentioning the concept of property. If you’re rich enough to be able to buy a home outright, or indeed several, then your salary goes much further (as you don’t pay rent or mortgage). Hey if you’re really rich you can buy up more property than your family needs, maybe you can start charging people for the privilege of entering your properly e.g. to live or run a business. So from very little labour you get richer and richer. You can start buying privileged access to all kinds of basic human needs, not least education. You and your children can live closer to other rich people and create huge scams where you buy mathematicians and physicists to create dizzying yet seemingly authorities ways to move money around, all the whilst cashing in. Hell why not control the very concept of money, print it and charge interest, putting your royal seal of quality there too. We live in a vicious version of capitalism simply because it is too easy for the rich to game the rest of us.
9th of November, 2011Kerry says:
I’d agree on needing to look at the patent system for pharmaceuticals generally, not just for antibiotics. Time was, you risked your cash on trying to invent a cure – literally on coming up with a newly-designed molecule and it was the structure of the thing that was both new and hard to come by. These days drug discovery and development is pretty cheap – the costs are before that point (identifying a mechanism of the disease to interfere with) and after (clinical trials). Patents failing to reward spending on basic research into disease models is one reason why we have no cure for Alzheimer’s but a million remedies for asthma. And failing to reward the spending on clinical trials is the reason why there are “orphan” drugs – out of patent, potentially useful, but not licensed for a given indication because they’ve never been tested in large trials.
23rd of November, 2011