Blame game.

'Capitalism has forgotten to share its wealth,' says the article headline in the Graun... er, the Telegraph. Excuse me, says I, where exactly does it say it had to? And so I ended up trawling through this piece by Jeremy Warner.

What is capitalism for? I ask this age-old question because I've spent the last three days at the World Economic Forum in Davos, Switzerland, and never have I seen the high priests of Mammon so gripped by self-doubt.

For? What do you mean what's it for? I'm not sure that it's supposed to have some high purpose as the question implies. It's just an economic system, isn't it? One which is strongly meritocratic and largely revolves around private ownership. That means there are certain things that are incompatible with it, some of which are 'for' things, but capitalism? It's just a way of doing things that's proven fairly popular among those who like freedom. It no more has a goal or a purpose than evolution. Why do you think it should have one?

Flash back to the same event 10 years ago, at the height of the dotcom bubble, and it seemed to those gathered on the mountain top that the free-market system could do no wrong. Communism had been vanquished, and we stood, it was confidently declared, at the dawn of a new age of ever greater prosperity and technological advancement, which would lift great tracts of the world out of poverty. That, indeed, is what capitalism should be about. There can be no higher purpose for any economic system than to serve society.

You what? It's not there to serve society. It's simply a means by which the individuals in society do business. It can indeed lift people out of poverty, and when it does so that's great. But is that supposed to be its function or just a positive side effect? Or to put it another way, when a dotcom billionaire made his money was the purpose of that just so he could pass that wealth on to brickies, chippies, sparks, plumbers and other tradesmen hired to build him a new mansion? Of course not. The dotcom billionaire had no obligation and was completely in his rights to lock himself in a warehouse full of $100 bills and live on pizza deliveries if that's what he wanted to do. The fact that most would spend their money on things like new houses is a bonus for other people, but not the purpose of the exercise. I hope that one day I make a big score and have a dream home and some big boy's toys, but it's not because my conscience is being pricked by the thought of somebody working in a yacht factory who could do with some overtime.

Yet it doesn't seem to have worked out that way. A few facts. Inequality between economies, and within advanced economies, has never been greater – witness this week's statistics on the widening wealth gap in the UK.

Oh, that again. Better people than I have already pointed out that this is not a zero sum game. There's nothing wrong with some people getting a bigger slice of pie than others, or even a bigger slice of pie than they used to, if the pie has first been made bigger. To use a very simple example, the Australia's GDP is about $1.2 trillion (that's our dollars, not American), which comes out at about $54,000 per capita. Let's say that by an amazing coincidence I happen to earn that amount (oddly enough I think it's actually not far off the median wage). Now let's say that over a certain period - ten years, fifteen, twenty, whatever - the economy doubles to AU$2.4, but my income only goes up by 50% in that time. Well? I might well be jealous of the bastards who've really come out well and more than doubled their starting income but fuck it, I'm still 25 grand a year better off, yes? And as long as inflation hasn't destroyed the value of that $25,000 I'm still ahead. See? With a much bigger cake we can all get a larger portion despite some of us having a smaller proportion.

Nearly 20 years of unparalleled economic growth has failed to alter significantly the ancient statistic that 90 per cent of the world's wealth is owned by just 10 per cent of its people.

True, but not all the world is capitalist. In fact I'd take some convincing that that part of the world which is capitalist is not (a) smaller and (b) shrinking. It's not perfect but it's hardly fair to blame it for inequality of wealth across the whole world.

Despite vast increases in productivity and wealth creation, median wages in the US haven't grown in real terms since the mid-1970s; over the last decade, they have actually declined.

Again, are you sure that capitalism is to blame? From your next few sentences I think you're pointing the finger of blame the wrong way.

Flexible labour markets have delivered big time for bankers and shareholders, but failed to improve the lot of ordinary workers in the same way.

On the surface it certainly might seem that way but anyone can be a shareholder and have the markets deliver 'big time' to them as well. You'd probably say that the majority can't afford shares, but I'd suggest that if someone can afford booze, fags, or overpriced takeaway food they can afford to invest that money instead. They certainly shouldn't be made to give up smoking and drinking and fatty food, but don't tell me the choice isn't there. And actually many people are shareholders who don't even know they're shareholders - some of these people who can't afford to invest in shares have invested in private pensions, and the pension companies certainly invest in shares. As with normal share investment the return is deferred, probably by decades actually, but if shares are paying dividends to all shareholders then those pensions are growing too. In other words the ordinary workers are not being shut out away from the benefits of growth as much as you suggest.

There's another point to consider here, because I'm inclined to agree that the positive effects have been smaller than we ought to expect, and that is whether we have true capitalism or something masquerading as it. I mentioned this ten months ago while fisking Pol:

When will you lot wake up and realize that you can't blame the free market because THERE AREN'T ANY FREE MARKETS BECAUSE GOVERNMENTS WON'T PERMIT IT. This constant fucking anti market whine (which seems to come both from left and what gets called 'right' these days) is like a spoilt teenager whinging that Santa didn't bring them what they wanted when they're old enough to work out that Santa doesn't exist.

Call it capitalism, the free market, laissez faire, whatever, but what we see every day that looks like it... well, sadly it's sometimes something else, as demonstrated by this clip I saw at Obo's the other day.Time for dictionary corner again.

capitalism |ˈkapətlˌizəm|
noun
an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

free market
noun
an economic system in which prices are determined by unrestricted competition between privately owned businesses.

laissez-faire |ˌlesā ˈfe(ə)r; ˌlezā|
noun
a policy or attitude of letting things take their own course, without interfering.
• Economics - abstention by governments from interfering in the workings of the free market : [as adj. ] laissez-faire capitalism.

Does that sound like what's actually going on, Jeremy? Call that capitalism? Call that a free market? 'Cause I fucking don't.

In Britain, growth in consumption was funded not by real economic advancement, but by the fool's paradise of ever-increasing debt.

Indeed, and is that a failure of a capitalist/free market system or the result of a decision by government to make debt artificially cheap? Take your time.

Now, the excesses of the system have brought fiscal ruin, and the worst economic crisis in 80 years. Yet the bankers have recklessly and arrogantly taken their windfall gains from the massive state support that resulted and paid them out in bumper bonuses.

And what particular parts of capitalism demanded that the bankers actually got that massive state support with which they're now paying themselves bonuses? I'll help you with this one: fucking none. The state intervention proves not that capitalism failed that but that we didn't actually have it at all. We had something claiming to be capitalism, we had markets that purported to be free, but when it came to the, aha, crunch nervous politicians lacked the balls to tell the bankers to sort their own mess out. If we really had capitalism some of them would have gone bankrupt who did not and the survivors would have learned an important lesson: government is not there to provide a safety net for businessmen. As it was the dumb fucks were bailed out by people even dumber and fuckier, and using money stolen from the rest of us. Tell me how that's worked out for the ordinary worker, Jeremy. He'll be helping to pay that bill for the rest of his working life.

Never has the multiple of a chief executive's remuneration to that of his most lowly employee been so high – in some cases, 400 times the amount.

And? Per the above, where this occurs in a capitalist system it's distasteful but not actually wrong. The most lowly employees are free to work elsewhere or to try to improve themselves and their own income, or even to stay put and bitch about it. Where this occurs because the government has responded to those in charge of failing businesses by filling their pockets with taxpayers' money it is not capitalism anyway.

In a speech this week, Andy Haldane, the Bank of England director responsible for financial stability, pointed out that modest reductions in the payments to shareholders and staff made by British banks in the run-up to the crisis – lowering dividends by a third and remuneration by a mere 10 per cent – would have more than covered all the capital that taxpayers have been forced to provide to bail them out.

Okay, I'm prepared to believe that. So why didn't it happen? Capitalism? Well, at a stretch I might accept that we might expect the bankers and other fuckups to go running to government in a capitalist system, but what we and they should all expect is for the government to tell them to go piss up a rope. If they go more in hope than expectation and then get told to sort their own mess out that's fine, but I think that subconsciously they expected to be saved and the government was retarded enough to actually go and fucking do it.

If there had been self-restraint, there would have been no crisis. Yet those responsible seem to have got off scot-free. The enormous fiscal and economic costs are to be born by ordinary people, through lost jobs, higher taxes and cuts in public services and benefits.

Oh, just put down the megabucks salary and bonus dog whistle, will you? Everybody is out for as much as they can get for as little risk as possible - that applies at every stratum from a benefit scrounger to an MP getting creative with his expenses.* The problem is that government changed the risk/reward ratio in such a way that it became dangerously unbalanced. The apparent risk shrank away to almost nothing because of the expectation that government would provide a safety net, and that made the various financial high wire acts seem less foolhardy than they would have had it been clear that any fall would be broken only by the ground, as would the bodies of those doing the falling. Where were the Treasury bods and the FSA people, and for that matter the last Chancellor? Why weren't they spending much of the past decade or so shaking their heads at the bankers and pointing out how much it's going to hurt them if it all goes tits up? They should have been doing the political equivalent of watching someone backing a long odds horse with a huge amount of loaned money and laughingly saying 'Fucking hell, the size of your balls! Well, your funeral if that three legged pile of dog food doesn't make it across the line' before walking off whistling. Instead they went to lunch with the bastards and sucked each others' cocks under the table. Google news reports mentioning Gordon Brown and Fred Goodwin going from 2007 backwards. And Goodwin was hardly the only one. No fucking wonder business leaders expected to be rescued by the government if it all went wrong - all friends together.

Again I ask if this can really be called capitalism?

If this sounds like a charter for socialism, it is not. Rather, it is a call for the restoration of the old-fashioned virtues of self-discipline, fairness and social responsibility. Capitalism is undoubtedly in crisis, but does anyone seriously think the market economy is about to crumble, or see a challenge to the core principles on which it is based – free markets, the rule of law, property rights, and the freedom to profit from the fruits of your own labour?
The alternatives have been tried, and their disastrous consequences make even our present horrors look a price worth paying by comparison.

Thank fuck you finally said that - I really was beginning to worry. But you've still missed the important point that it is not capitalism that's in crisis because what's brought us to this point is a twisted and bastardised version of it. Capitalism's evil twin if you like.** In fact I'd say that what we have is in fact one of the alternatives that so horrifies you (and me for that matter).

So self-evidently desirable and beneficial are these pillars of the market economy that even China, after years of fighting them, is embracing them as quickly as it dares. But China wants the benefits, not the excesses, and so far, in this giant experiment in market liberalisation, it seems to be getting them.

I'm just speculating here, but I wonder if the Chinese government would bail out failed businesses. If so maybe it's that knowledge that the government will not be there to help sticks in the minds of the new Chinese capitalists and encourages a more cautious approach.

Indeed, the self-confidence of Chinese leaders, and those from other emerging markets in Davos this week, is in marked contrast to the self-loathing and disharmony which has engulfed the advanced economies. China has had a good crisis, and has plenty it can now teach the West about the merits of hard work over entitlement, long-term thinking over short-term gain, saving over borrowing, and investment over debt-fuelled consumption.
Capitalism doesn't need to be reinvented; it just needs to be rediscovered. Perhaps oddly, a Communist state may recognise that better than the self-harming economies of the West.

And finally we agree. Capitalism needs to be rediscovered, and more than that we need to wake up and realise that what we've had for sometime ain't it.




* Some might say that there isn't much difference.
** I'm not saying that capitalism is good. It isn't. I'm just saying that it's not evil.