David Cameron believes he is on a crusade to drive a new “moral capitalism” (Report, 19 January). He should read Will Hutton on stakeholder capitalism and look to Germany, where employee representatives engage in corporate decision-making including levels of executive pay, local banks provide long-term support to business, apprenticeships remain common, stakeholders include suppliers and distributors, and community engagement stems from a responsibility to protect the interests of all employees.
The ghastly alternative of shareholder capitalism engineered by Conservative governments in the 1980s, and cravenly supported by New Labour, has destroyed UK manufacturing and turned the country into a spivs’ paradise, with investment banks and hedge-fund managers holding everyone, including the government, to ransom. Where is the moral compass in gambling on corporate failure? Or in ensuring that one of the few profitable UK manufacturing sectors left is an arms industry mostly in partnership with the US, a war-exporting economy?
Shareholder capitalism regards share value as the only criterion for success, encouraging foreign takeover of businesses like Cadbury’s that for 176 years had applied Quaker principles. Asset-stripping has become a national sport, devastating families and communities. It is inconceivable that Cameron will reverse this ruinous crusade on behalf of the super-rich parasites who have devastated the UK economy.
The tragedy is that the stakeholder model remains under attack throughout the western world. Without a multilateral turnaround by all OECD countries, beginning with the closure of tax havens and the imposition of a financial transaction tax, and the establishment of a World Environment Organisation possessing common powers and veto alongside the World Trade Organisation, we are heading towards an economic, environmental and social meltdown.
University of York
•?While Tweedledum and Tweedledee argue over the nature of “popular capitalism” (Socialism belongs here, 21 January), mainstream solutions on both left and right will only deepen our social and economic crisis in the long run. The suggestion that China might be the model to follow to cure our economic woes shows how out of touch with reality we have become (China’s success challenges a failed economic consensus, 18 January). While backing the idea that public ownership should be at the heart of a solution, we must also recognise that China-style 9% annual growth in GDP across all countries would spell long-term disaster for the planet and its inhabitants. The thinktank Green House has embarked on a year-long project to describe the economic and social characteristics of a world in which indiscriminate growth is not a precondition for prosperity. We need a new alternative, not simply a false choice between austerity and increased GDP.
Professor Andrew Dobson
Green House thinktank
•?The UK government is “delighted” that the Chinese government has bought a substantial holding in the company that controls the privatised utility Thames Water (Report, 21 January). Deutsche Bahn, still the monopoly and state-owned German railway company, now owns a major privatised British transport interest (Arriva). A major element of our power generation industry has been bought by EDF, in which the French state has a controlling interest. Even Barclays, determined to be independent of the UK government’s efforts to bail out the banking sector, now has the state-owned Qatar Investment Authority as its largest shareholder. But our own government, having become the principal shareholder in some of our banks, is so keen to get rid of them that it is prepared to sell Northern Rock to Virgin at a major loss to the taxpayer. So it looks like it’s OK for foreign governments to control important UK assets, but not OK for the UK government to do so. Or am I missing something?
Dr Bernard Naylor
•?As we step gingerly into the new year, one cannot help but be struck by the degree of political and economic hopelessness which pervades Europe, as governments strain to outdo each other in feats of austerity for fear of the market’s terrible retribution. Meanwhile, unemployment continues to rise and faith in politics and capitalism itself erodes.
The Bank of England should redirect some of its QE toward “shovel-ready” infrastructure projects: social housing, fibre-optic broadband, motorway widening, acceleration of Crossrail etc. Where possible, let the private sector evaluate the economic viability of each project and carry out the work. This funding may also be more effective than conventional QE in creating the demand growth we wish to see and support our economy until the banks and the government itself have stabilised their balance sheets.
The Bank cannot, by statute, be exposed to private sector losses, but this could be overcome by issuing infrastructure bonds via a government entity with guarantee attached to safeguard the Bank against such an occurrence. It is hard to see how such money-printing would be inflationary given the spare capacity in our economy currently. In time, the Bank could reduce its support and balance sheet by selling the bonds, helping to create a retail bond market.
Something similar could be done in the eurozone with the ECB funding the EU’s structural and cohesion funds.
Keynes may be dead, but surely we can adopt his teachings for the modern era rather than submit to this austerity-fuelled melancholy.
FPP Asset Management
•?The call from the IMF, the World Bank and other international agencies for a move away from job-killing austerity towards green policies and infrastructure spending (IMF warns of risk posed by global austerity plans, 20 January) must shape the growing debate around the slippery concept of responsible capitalism. Since 2008 the Green New Deal Group has been documenting just such an action plan. So here is one we made earlier.
Step one, the government must put its only significant job generator, the “Green Deal”, on economic steroids. £275bn has been e-printed and frittered into the coffers of banks via quantitative easing. The expected next round QE 3 should instead allocate £20bn to kick start a huge energy saving programme involving up to 14 million homes. This would start to tackle the coalition’s biggest deficit – adequate demand in the economy. Step two, use some of this money to act as a guarantor to attract further private funding, particularly pension funds. This could be used to train and employ a carbon army to crawl over every building in the UK to make them energy-efficient. Younger people would be the main beneficiaries, particularly in urban areas where the vast majority live. Leveraging billions from pension funds to employ the young would be a welcome act of intergenerational solidarity.
If the government doesn’t listen to the IMF and immediately adopt such a programme, this would give the two Eds something large-scale and concrete to propose, ie a “Green Prosperity not Blue Austerity” approach that puts clear green-blue water between Labour and the coalition.
Convenor, Green New Deal Group
•?Tristram Hunt is quite right to argue that is a long tradition in Britain of opposition to the excesses of the unfettered free market, and that the choice is most certainly not between Brent Cross and Soviet-style central planning. What he fails to emphasise sufficiently, though, is that there are many versions of the modern “market economy” ranging from the Nordic social-democratic model to Chinese state-led development. Cameron’s “popular capitalism”, like Thatcherism before it, points towards the deregulated capitalism associated with the United States. But it is precisely this finance-dominated Anglo-Saxon model which in recent years has been found wanting. One needs only turn to egalitarian Denmark or Sweden to see that the market, however poor a master, can be a good servant.
Professor George Irvin
Soas, University of London
•?Larry Elliott believes that the rating agencies’ failures in assessing sub-prime investments don’t detract from the accuracy of their downgrades of sovereign debt (Cuts on the menu as five-star guests arrive, 16 January). Maybe, but how do the agencies calculate, if at all, the precise impact of their predictions on investors’ behaviour and the subsequent economic credibility of the downgraded nations? If they don’t or can’t include such impacts in their predictions, then surely we are into similar epistemological territory to Heisenberg’s uncertainty principle – crudely, that by attempting to measure the phenomena they are affecting the very outcomes being investigated; here, making the economic situation worse. If they can predict their impacts, I’d like to get some money on their forecasts for the next meeting at Bath racecourse.