“Capitalism only works for the few, not the many – and its ugly side will flourish” – Jason Beattie


Latest figures on profits made by an oil giant last year, contrasted with poverty statistics, show the rich have never been so prosperous while the poorest are turning to food banks in record numbers

One million adults in the UK have gone a whole day in the past month without eating because they couldn’t afford to.

Capitalism only works for the few, not for the many.

Two glaring figures were released this week. The first was £378 – the amount of profit BP made every second in the last three months of 2021.

The other was a million. That’s the number of adults in the UK who have gone an entire day in the past month without eating because they couldn’t afford it.

The numbers illustrate where we are as a nation. The rich have never been so prosperous while the poorest are turning to food banks in record numbers.

With each measure, the gap between the haves and the have-nots has widened. In Britain, between 1984 and 2013, the wealth of the top 0.1% doubled.

One in five of the population (14 million people) today lives in poverty, including more than four million children.

English economist John Maynard Keynes at the United Nations International Monetary and Financial Conference


Getty Images)

While the collective wealth of Britain’s 171 billionaires has increased by 310% over the past decade to £597.3 billion.

The UK is a rich country but the wealth is not distributed fairly.

Figures from the Office for National Statistics show that the richest 10% of households hold 44% of all wealth. The poorest 50% own 9%.

In the 16 years to 2008, average earnings jumped 36%. From 2008 to 2024, they are expected to increase by 2.4%.

It’s not always the case. Britain was much more egalitarian in the 1960s and 1970s.

Take, for example, executive compensation. In 1960, the bosses of the biggest companies earned 21 times more than the average worker.

Ann Pettifor, Economist


Getty Images)

Today it’s 141 times that, with chief executives of the 100 biggest companies earning an average of £3.46million a year.

How did we get to this situation? And why does capitalism only work for the few and not for the many?

To understand how this great wealth divide happened, we need to go back to the United States over 50 years ago.

An international agreement, the Bretton Woods Agreement, was reached in 1944. The system, co-designed by British economist John Maynard Keynes, imposed controls on global finance.

These controls were later removed by US President Richard Nixon in 1971.

Former US President Richard Nixon


Getty Images)

Economist Ann Pettifor said it was a ‘catastrophic’ decision, adding: ‘Before this governments sat together and said ‘we are not going to allow countries to run deficits and massive surpluses because it creates trade tensions.” Nixon says “let the markets do their thing.” Of course, Wall Street was thrilled. That paved the way for deregulation.

And deregulation meant big business and very wealthy people could transfer money from one country to another to avoid paying taxes.

The legacy of those rules includes the fact that Amazon’s UK revenue in 2020 was £20.6bn, but it only paid £492m in direct taxes.

Money that should go to the Treasury is diverted from this country to low-tax states like Luxembourg. It was also in the 1970s that the United States tore up anti-monopoly rules, and once America began to dismantle financial regulations, Britain began to follow.

Figures from the Office for National Statistics show the richest 10% of households own 44% of all wealth


Getty Images/iStockphoto)

Companies have realized that it is much more profitable to make money with money than with a tedious task like manufacturing, which requires labor.

Light regulation should have ended with the financial crash of 2008, when banks sank under the weight of the debts they had accumulated through speculative borrowing and excessive expansion. In fact, the reverse happened.

Finance has exploded since the crash and inequality has widened.

To keep the banks afloat and prevent the economy from plunging into recession, the Bank of England turned to quantitative easing.

Tory MP David Willetts has noted that there is pessimism about whether our children will enjoy the same kind of increase in living standards that we enjoy


Getty Images)

This involves the Bank buying bonds from banks who then lend money to businesses and households.

The Bank bought £850bn of bonds through the scheme, which helped the UK through the worst of the recession, but returned money to those who already had it.

Guy Hands, the boss of Terra Firma Capital, has been very open about how he has benefited, saying in the BBC documentary The Decade the Rich Won: “The effects of the recapitalization of the economy as they did was that the rich got richer.

“If you invest a lot of money in the system, it will end up [with] those who have money. Those of us in private equity have become incredibly wealthy. Lord Prem Sikka, an accountant and academic, said QE had done little to help ordinary people.

He added: “Wages barely rose above pre-crash levels.

“Even though stock markets have benefited from QE, it hasn’t really benefited Britons. Only 13.5% of the shares of UK-listed companies are owned by UK-resident individuals.

As the rich got richer, George Osborne unleashed his austerity measures on the economy.

Services have been cut, salaries have been frozen and investments reduced.

Mr Osborne found the money to offer a tax cut to hedge fund managers. As private equity boomed, workers were the main losers. Explaining how private equity works, author Nick Shaxson said: “They buy companies and then apply financial engineering to them.

“It’s usually about getting companies into debt. The private equity magnates are not responsible for this debt, it is the companies they buy that are responsible. They buy a business and then say to the bosses ‘your business needs to borrow £100m’ and then they say ‘pay us that £100m and we’ll spend it on yachts or whatever and you’re going to have to pay that loan back with interest’.

Only 13.5% of the shares of companies listed in the UK are held by individuals resident in the UK, said Guy Hands, the boss of Terra Firma Capital.


Getty Images)

“They made a killing, there is nothing productive at all. They could [also] manage all its financial affairs through tax havens. It creates extra money for them [but] did nothing useful for the company. It only stiffens taxpayers.

The weakness of British trade union laws has only facilitated this task. Covid has been a boom time for the private equity industry.

He picked up supermarkets, vets, funeral homes and nursing homes.

Tory peer Lord David Willetts said: ‘The next generation should be better off than [us], this is part of the promise of capitalism. But there is pessimism about whether our children will benefit from the same kind of increased standard of living that we enjoy. That’s why people are starting to worry about capitalism.

Some economists say the answer is tougher regulation. But Britain is ready to go the other way.

A reflection is underway on the rules governing financial services to make them more “agile”.

The fear is that the changes will let the ugly side of capitalism flourish even more.

Read more

Read more


About Author

Comments are closed.