Are the Tories actually killing off Capitalism?

by Ray_North on November 14, 2013

Unknown-1A couple of things have impinged themselves on my consciousness this week and left me scratching my head:
first, came the news that a Francis Bacon painting has been sold at auction for $142million and an Andy Warhol painting for $105million; after that, I heard the Governor of the Bank of England, Mark Carney declare that we are now actually in a period of economic recovery, news that caused the Chancellor, George Osborne, to gleefully claim that this was a vindication for his economic policies.

Those two announcements came on the same day that I sat in a meeting at my local primary school where on the agenda was the cuts in funding that we were going to have to deal with over the next five years. The conclusion was that the school (which is an excellently run state primary), will have to ditch much of its music lessons and some of its after-school clubs to save money. The amounts that are being saved by this are about £18000 per year. Which, of course, wouldn’t buy you a square inch of an original Francis Bacon or Andy Warhol, but will be devastating for a whole generation of pupils who, who knows, may with the help of music lessons or other extracurricular activities have become future Bacons, Warhols, Hockneys, Taveners or Forshawes.

But, still George Osborne gloats about the state of the economy – even though the reality is that we have an economy that is in long term decline, regardless of how you try to dress it up, it is based upon low wages, is badly structured and is unable to provide adequate resources to the state to ensure that things like my children’s violin classes and football clubs are able to continue.

But the Tories don’t seem to care about that. In fact the failure of our economy to provide sufficient resources for the state or the fact that is creating a socially uneven society does not trouble them in the slightest.

And it should, in fact if this breed of Tory were proper capitalists then these inherent failures in the system would bother them a lot.

But these Tories aren’t capitalists at all – their politics and philosophy is more akin to a form of feudalism. They appear to take their economics from the pre-industrial age and are more than content to see our economy organized in a way in which the rich are able to accumulate massive wealth, whilst everyone else becomes little more than a servant to that aim. In fact I don’t actually think the Tories really understand capitalism, they certainly don’t understand capitalism within the framework of a liberal democracy.

What is capitalism? Well, what it isn’t, or what it shouldn’t be, is the mindless pursuit of wealth and profit at the expense of everything else. What capitalism is, is the system of capital flowing through society without a central control on supply, demand and price; profit can be a by-product, sure, but profit and wealth are not the only by-products, and shouldn’t be the main aim of capitalism. An effective capitalist society accepts that there must be a flow of capital in the form of money into the hands of consumers – it does this by engaging the people from within the society in the labour force and by paying them wages for their endeavours. In a good capitalist society the people are paid properly because this keeps them happy and because this also allows them to consume and keep the flow of capital or money through the system.

But, of course, in the most effective capitalist nations, those which are underpinned by liberal democracy, the people aren’t just treated as cogs in the wheel of business, they are educated (regardless of their class), they are kept healthy, they are encouraged to create and express themselves; when they are ill or out of work or old, they are not seen as parasites or a burden but as people show should be looked after. And, it is accepted that for this to happen there has to be a state and that state has to run as well as any business – it has to provide schools and hospitals and enforce law and order, it has to provide care for the elderly and housing and transport and it has to do all these tasks with the same professionalism and skill as any private business. Good capitalists understand that, they also understand that there is nothing wrong with state regulation to ensure that businesses do not cheat the system by cheating their employees or customers; and that everyone should pay taxes, not as a form of voluntary charitable donation, but as a matter of course because they accept and know that this distribution of wealth is a necessary and effective way of ensuring that society as a whole benefits from their work.

And, of course, in a liberal democracy, the state is run by the people for the people, all the people.

This is a proper capitalist democracy. And, sure, in this system, some people are going to become wealthy.
I don’t have a problem with that.

But, this is no longer the type of capitalism that we are experiencing in the West – what we have in the West is a system where the richest are increasingly estranging themselves from society as a whole – they are finding as many ways as they can to opt out of paying taxes, they try not to rely on the state for anything, and encourage the view that the state is somehow bad or inferior, and they do this with such success that it becomes a self-fulfilling prophecy as the state can no longer fund the essential services that its people need, whilst the political will to mend it and keep it running evaporates.

The people are still expected to consume, but are paid relatively less and less – leading to debt or apathy, after all, if the richest are opting out of society, then why should I bother?

The workforce becomes increasingly incapable of carrying out the work it is expected to do because of a lack of education or training, and society as a whole is impoverished by the removal of things such as the music lessons that are being cut by my kid’s school; and all the while, big companies or massively rich individuals act like feudal landowners paying millions for art, because it helps them avoid tax and because they can.

This is the system that the Tories are working towards. What they don’t understand is that the system they are hell-bent on creating is not good capitalism, it doesn’t encourage entrepreneurialism or progress, it creates inequality and unhappiness and unfairness. It creates a society where the skills and abilities and potential of the many are ignored as it strives to ensure that the lucky few maintain as much power and wealth as they can.

And, mark my words, it will all end in tears.

{ 7 comments… read them below or add one }

George_East November 14, 2013 at 9:39 pm

They are plutocratic rent seekers governing on behalf of plutocratic rent seekers. It is the least efficient form of capitalism imaginable. In order for the economy to work well there has to be an adequate distribution of wealth such that people have money to spend.
Instead we have three deliberately wasted years in which the economy flatlined followed by overall growth, but with real wages falling. That tells you that the growth is being fuelled by debt (the insane Osborne election gambit that is Help To Buy) and that the product of what growth there has been has been concentrated in a tiny slither of society at the very top.


Ray_North November 14, 2013 at 9:45 pm

Yes, yes and yes George. Spot on.


Hugo November 14, 2013 at 11:33 pm

Your vision of the future is so true. But I don’t agree that capitalism is anything other than the rich getting richer and the poor getting poorer. The term Capitalism was invented by Carl Marx in Das Capital to decribe the economic laws of the capitalist mode of production. What we have now is what Marx described in the 19th century. Capitalism.

The Tory’s haven’t forgotten anything. They are reaping the rewards of defeating the Private Sector Unions. I stress Private Sector!! This is result of 30 years of unappossed right wing free market economics. This is what all that deregulation was intended to do. Welcome to hell.


Ray_North November 14, 2013 at 11:36 pm

I wouldn’t disagree with that Hugo – and I concede that, perhaps, my definition of capitalism was a generous one, tending towards a utopian version of benign caring capitalism. But, the point I make is that if it is to work properly, then there has to be a more effective form of through flow of capital than we currently have, because what we currently have is just a mass of people making nothing, contributing nothing and getting rich from speculation that often adversely affects the lives of the rest of us.


Mike Killingworth November 15, 2013 at 8:37 am

The kind of capitalism Ray is fantasizing about is the sort we had before Bill Clinton decided to spread its (supposed) benefits world-wide through GATT.

As Hugo says, capitalism is exploitation, whether of natural resources or of labour power, and anything else (such as the occupational pension that allows me to sit here and write this) is actually an inefficiency.

Prior to GATT the British worker was cushioned from reality by an international economic system that hadn’t really changed since the days of Empire and its associated “Imperial Preference.” This provided the British worker with cheap food and (except for London and its hinterland) cheap housing (my father bought an orchard fifty years ago and built a detached 4-bed house on it for £3,500) – these factors, together with the welfare state, provided British industrial capital with cheap labour which in turn led to profit-taking and disinvestment.

Profits represent an uncertain income stream at best: the wise capitalist seeks to convert them into rent (a licence fee to use a particular innovation, for instance) and wealth from natural resources, such as oil, is rent through and through. And it is rentiers, not capitalists, who are driving the London housing market, which in turn is driving the market in the rest of the country.


Hugo November 15, 2013 at 9:26 am

The system is screwed! However well meant, the introduction of the minimum wage ave employers a bench mark by which they could gage just how little they can pay their workforce. An employer now knows his competitors wage bill and so long as he/she pays the same there’s little or no inventive to increase wages. These surprised wages allow the employee to maximise profits which are then used to buy property which is the. Rented out to low paid workers. The employee benefits from low wages by the fact that they are topped up with ‘family credit’ ‘working family credit’ and the bigger irony if all the ‘housing benefit’ required to pay rent to those same employers who are now also the landlords. This is all falling apart as the employer/landlord that can pay low wages because of working tax credits and can charge high rents because of housing benefit are now avoiding paying he tax required to prop up this perverse system. IDS (not the sharper tool in the box’ answer to this is to cut the very benefits that have been propping up the system. IDS is actually cutting the throats of idle rich without then even noticing and in most cases with their support as the rich don’t want to pay the taxes required to keep their gravey train from hitting the buffers.

Turing to the banks, Thatcherite policies of private pensions and investments has turned the ‘City’ into a monster craving the monthly
Inflow of cash from pension contributions and ISA’s et al, to feed its greed. It’s a monster pyramid scheme which cannot be stopped as to do would hand the pension bill back to government. Even more ironically the biggest of all private sector landlords are the pension funds wholly reliant on land and property inflation to balance the books. The banks are untouchable, the employers are reliant on hidden subsidies for their wealth and the politians are half whits with no understanding of economics and no life experience to allow them any form of empathy.

As I said, welcome to hell.


Hugo November 15, 2013 at 9:48 am

Please excuse the typo’s and predictive spell corrections in my previous post. I have a cold an feel shitty.


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