Gavin Maclure's Musings

My take on politics locally, nationally and internationally

Today’s capitalism is a like a child which never grew up

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It may come as a surprise to some of my Left-wing critics, but I am becoming more concerned by the day about the state of capitalism. We certainly don’t want to go back to the economy of the 1970s, where mass nationalised industry and crippling union behaviour brought this great country to its knees, forced us to run to the IMF and we were labelled “the sick man of Europe” by our sniggering European cousins. Thatcher rescued us from this great shame and allowed capitalism to flourish during her tenure when she introduced the free market to almost every sector with privatisations of our utilities and the deregulation of The City. Many ordinary people like my mother and father benefited enormously from Margaret Thatcher’s policies and the middle class expanded greatly under her rule to the point where hardly anyone calls themselves working class any more. Any that do seem to miss the point as they are likely to be on benefits.

But capitalism has not matured over the last 30 years. It still behaves in an infantile manner and certain immoral people have taken advantage. Bankers, CEOs, non-executive directors have spent the last 20 years lining their pockets off the backs of the low to middle income earners like my mother and father and now my working generation. Frankly, it is immoral and wrong for ANY CEO to earn £1million whilst the next high earner in the company outside of the boardroom will never go above £100,000.  Now, don’t get me wrong, £100,000 is still a huge amount of money but a) very few senior mangers outside of the boardroom will earn this and b) it is TEN times less than the CEO. And of course, the vast majority of people in a company, myself included, are earning nothing like that kind of money.

So, what makes a CEO so special? Why is he worth £1million basic salary? The answer is he is patently not. In the boom years FTSE 100 CEOs were earning £1million+ whilst their company, for example, was sitting on £20bn worth of debt. The CEO in this instance was certainly not worth a basic salary of £1million.  Bankers were trading products they did not understand, merging with companies stacked with toxic assets and yet still they were giving themselves £millions in pay and bonuses. Directors of Remuneration Committees were and still are ensuring their mate in one company is trousering a few £million a year as long as their mate ensures he will get a few £million from the company he runs. There is a word for that: corruption.

And still the vast majority of ordinary workers in companies up and down the land did not benefit from capitalism in the boom years between 1997 and 2008. In fact most hardly received above inflation pay rises during this time. The money, instead, was given to a few thousand at the top our publicly-listed companies. They then proceeded to live high on the hog and, in the case of the bankers, they had so much money they bought up properties in London every year they did not need and have effectively priced any ordinary worker out of the London housing market as a result.

We have since had an economic crash on a par with the 1930s depression. And nothing has changed on executive pay. The elite in the boardroom still take home most of the money whilst the other employees do the real work.

However, before any of my left-wing friends get too excited, let me emphasise I am still an ardent supporter of capitalism, privatisation and free-markets. In shorthand, I am a Thatcherite. But Thatcher, if she was still Prime Minister today, would be revising capitalism, modifying capitalism, maturing capitalism. She would be ensuring the great benefits of capitalism, which saw millions of families like mine become part of the burgeoning middle class, were continued to be received by us in the 21st century. As a grocers’s daughter she understood ordinary workers and saw it as her moral duty to ensure the wealth of capitalism flowed down the workforce line. Thatcher certainly did this during the 1980s but successive Governments failed to continue with this policy.

At the present time, I and millions of other workers up and down this land are patently not benefiting from capitalism. This does not mean we are going to vote for the pygmy that is Ed Miliband. No, we don’t want a something for nothing society and one that sees a free economy enslaved by nationalisation and socialism. We want to see more fruits of capitalism in our purses and wallets: the complete opposite of socialism.

How can ordinary people benefit more from capitalism in the 21st century? A very difficult question to answer. The Liberal Democrat Business Secretary, Vince Cable, has started to address the issue but only in words not deeds. I think we need to do these two things first:

1. A ratio cap. That is CEOs can only be paid a maximum multiple of a average middle manager’s salary. This multiple will be difficult to calculate but it is not beyond the wit of man to derive.

2. Employee representation on a company’s remuneration committee (which I commend Labour for proposing). In many companies, there is very much a rule for the workers in terms of performance management and reward and another for the board members. By having employees on remuneration committees a CEO will start to be treated like any other employee is when it comes to their pay – because they are like any other employee.

The above won’t be enough, however, until the big institutional shareholders such as the pension fund managers also develop some morality and ethics and start to walk the talk regarding obscene CEO and banker pay.

The Right are starting to wake up to the misbehaviour of the capitalism child. David Davis MP – not exactly a left-wing stooge – has expressed his concern about high executive pay. YouGov has also found that Tory voters want a Mansion Tax introduced on properties worth £2million or more. I’m not in favour of this. I would prefer to cut obscene pay at source by bringing some morality into the boardroom and see the additional money pushed down the line. First and foremost we need a strategy from Number 10 on how to develop capitalism for everyone again: I fear David Cameron and George Osborne don’t know how to.

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Author: gavinmaclure

IT professional; political blogger, former Conservative councillor

2 thoughts on “Today’s capitalism is a like a child which never grew up

  1. GavinThis is somewhere we could learn from Europe, Germany for years has had employees on remuneration committees and also in other positions on other boards of large German firms.This has led to very few German CEO's being paid millions in Euros – and has not led (as many in the City and Tory Party declare) to a brain drain from Germany.

  2. Pingback: You’ve presided over 1,200 deaths? Oh, here’s your £1.9M pension pot | Gavin Maclure's Musings

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