Is Capitalism Sick?



“Is capitalism sick?” inquires a challenging headline in the Sunday Times. The answer, over many paragraphs, is no. Capitalism, the article reveals, is in fine fettle. The only thing wrong with it is the occasional rotten or greedy capitalist.

Hank Paulson, chief executive of Goldman Sachs, warned the National Press Club in Washington last week: “Business has never been under such scrutiny. To be blunt, much of it is deserved.” The Sunday Times moaned its way through a litany of recent scandals.

First there was Enron, whose disgraced chief executive Kenneth Lay is a close friend of President Bush, whose audit committee was chaired by former Tory minister Lord Wakeham, and one of whose more ideological paid advisers, Irwin Stelzer, still has a weekly column in the Sunday Times.

Now there is Tyco – presumably short for tycoon – whose former chairman, Dennis Kozlowski, is charged with tax evasion and whose director, Lord Ashcroft, is a former treasurer of the Tory party and a generous donor to British state education. ADT College, named after Ashcroft’s company, still teaches children in South London, but perhaps now it should change its name, since ADT was swallowed by Tyco in 1997.

Last week there was great news for another great A: Bill Allan, chief executive of a telecoms company ludicrously called Thus. Allan and his fellow directors got bonuses worth 70% of their salaries to mark something called “exceptional business performance”, presumably a reference to the 72% fall in the company’s share price.

Last week, these heroic As were capped by a sensational B – for Bonfield, the knighted former chief executive of ailing British Telecom, which recently wound up its final-salary pension scheme for ordinary workers, but somehow managed to find a few million to “top up” Sir Peter’s already vast pension by another £2,000 a week.

Bonfield has a perfectly good job elsewhere, but when he left British Telecom he took a year’s salary (£820,000) and a bonus of £615,000, no doubt as a mark of respect for his record as mastermind of one of the most disastrous privatizations of modern times.

These companies and individuals, Paulson argued, are letting down the system. They are giving capitalism a bad name. If only individual capitalists didn’t lie, cheat, perjure themselves in libel actions, stuff their pockets with grossly excessive or ill-gotten gains, deceive the taxman by buying expensive paintings with other people’s money and then hanging them on their own walls, if only their accountants didn’t spend their extremely valuable time thinking up complicated schemes to avoid tax and then shredding the documentary evidence, then the beautiful symmetry of the capitalist system would shine forth. If only the rotten apples could be rooted out of the capitalist barrels, the full glory of the fruit could be properly appreciated.

The problem with this argument is that it overlooks the central feature of capitalism: the division of the human race into those who profit from human endeavor and those who don’t. This division demands freedom for employers, and discipline for workers; high pay and perks for bosses, low pay for the masses; riches for the few, poverty for the many.

Under capitalism the gulf between rich and poor grows wider and wider. The whole point of the system is that it works against equality, against co-operation. It stunts, insults and criminalizes the poor; glorifies, cossets and pardons the rich. All human life is corrupted in the process. So even if you could discipline all the offenders, lock up all financial advisers to the US president, ban from public life all former Tory vice-chairmen, even if company directors spent a year in jail for every bonus they steal, there would still be no hiding place from capitalism. The rotten apples are the barrel.

Reading last week’s sermon from Paulson, I was reminded of a brace of challenging headlines in the Guardian on December 10 1993. These headlines highlighted the difference between a group of 26 million people who shared $2.2bn and another group of only 161 people who shared $2.6bn. The first group was the entire population of Tanzania, the second the partners of Goldman Sachs, the company Paulson heads. And however much he lectures his capitalist colleagues about their individual misdemeanors, he cannot and will not correct the intrinsic flaw in the economic system he represents, so starkly symbolized by the greed of the people who run his bank.

Is capitalism sick? Yes, disgustingly so. Its sickness is terminal, and it urgently needs replacing.


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