Politics

Capitalism

Friend Steve and I often discuss politics and, although there are many things we agree on, sometimes find ourselves at odds over capitalism. What we both agree on is that capitalism is the only viable economic framework. Small enterprises can be capitalised on sweat, an approach I have sometimes taken in my working life. Any large enterprise, however, will need funding and that can come only from private investors or the state. If all funding comes from the state the state necessarily controls all related projects, an approach that has been demonstrated not to work, for whatever reasons, countless times. So the role of private investment, and capitalism, seems to be crucial, irrespective of one's political views.

Steve and I also agree that unfettered capitalism, “red in tooth and claw”, is not desirable. The CEO of Unilever has been cited as echoing Winston Churchill's comment that democracy was the least bad system of government that has been devised: words to the effect that capitalism is the least bad economic framework that has been devised. Where Steve and I sometimes diverge is on the nature and placement of the restraints that should be put on capitalism. However, a recent article I read (in which the Unilever CEO was quoted and which I can no longer find and therefore attribute) could have a basis to reconcile our views.

The article was primarily arguing against companies buying back their own shares, on the basis that that was the company “eating itself”. Share buy-backs are a way of keeping a share price artificially high, in line with the prevalent business view that a company's first duty is to its shareholders, but essentially just move money between the company and its shareholders. They do nothing for the economy at large and it is economies at large that are the major concern now. The article argues that this is not only bad for economies but also for the company itself in the longer term. Most interestingly, the article argued that concerns about unemployment, the level of the minimum wage and the growing wealth inequality gap might all be resolved by a rather different economic view.

The basis of the difference was the assertion that a company's first duty should be to its clients and not its shareholders. By focussing on clients as its primary duty it would be in a position to create more income and, incidentally, more value to its shareholders. More income means the possibility of expansion and more jobs and raising the level of the minimum wage would mean more disposable income for employees to spend; since a percentage of employees might well also be customers, the additional wage cost was not simply a cost drain; moreover, it would serve to put a brake on the wealth gap.

Other large-company CEOs echoing this view were cited in the article. An intriguing point about this is that if this view comes to prevail and it is accepted that shareholders are best served in the medium to long term not by focussing on them but on the company's clients, then this is capitalism reforming itself from within rather than by any state instigated legislation. So an army of civil servants wouldn't be needed to enforce it. In a sense, it would be a return of the great industrialist philanthropists of the Victorian era. And arguments on minimum living standards and the wealth gap could move from the moral realm to the economic one, with potential benefit for all concerned; that is, all stakeholders in society.

I think that this is a view on which friend Steve and I, despite our slightly different starting positions, might quietly agree.

Cuba

The alternative to capitalism can be seen in Cuba. I have tended to regard Cuba with some sympathy, since I believe overthrow of the Batista regime benefited the large majority of Cubans. True, in return for the improvements Cubans received, in terms of healthcare and education for instance, they had to accept restrictions on many personal liberties (and listen to exceedingly long and boring speeches). Economic sanctions imposed by the USA were and remain a heavy burden, although that aspect may be changing. However, I have friends who know Cuba and have suggested to me that the country is now in an extremely parlous state, only marginally attributable to the USA's foreign (economic) policy. Shortages of essentials in the country can only partially be attributed to sanctions; the state-run economy has failed and the country is kept afloat only by tourism. To aggravate matters, interference with personal liberties has reached an intolerable level, unsustainable outside a dictatorship and police state. That is what I have been told and I have no reason to doubt the truth of it; and tourists are mostly kept in enclaves and can have little contact with local inhabitants.

I knew that some other friends of mine would be visiting Cuba shortly tourists and I knew that they, as well as wanting to enjoy their holiday, would be interested in meeting and knowing about the lives of the local inhabitants. I was going to prime them but was too late; they had already been and, anyway, apparently found no way to escape their enclave.