Responsible capitalism

There’s been a lot of talk this week from the two main political parties about responsible capitalism. Sadly, so far, it has all been rather content-free – a few isolated points about how we shouldn’t allow bankers to claim bonuses where the performance of their banks is actually getting worse, and how we ought to strip knighthoods from ex-bankers whose governance appears, with hindsight, to have been less than great.

What is absent from these discussions is any idea of the principles of what responsible capitalism might look like. Aside from homilies about wanting to reward good performance and not bad, and to remind business about its duties to wider society, it’s all a bit empty. What follows is some ideas on what we might do if we were to actually try and achieve some kind of responsible capitalism.

First, we need to recognise that is unlikely that any of us, in ourselves, contribute a great deal to productivity or growth or our firm’s performance. We are either fortunate to work in an economy where existing infrastructure (including public services) and business relationships allow us to make our mark, or less-than-fortunate and be born somewhere where we don’t get access to education, or opportunities, or businesses, and so have a great deal more barriers to overcome even to survive. To imagine somehow that it is our own brilliance that makes for good business performance is rather delusional. Some of us make better fists of the hands we are given than others, and some worse. But none of us educates ourselves from scratch, makes the economy from nothing, and builds a business context where we can be successful.

I’m not minimising the brilliance of entrepreneurs and great social figures who have done real good. What I am saying is that, in order for the them to be brilliant, a great number of other things had to happen first. Neither am I saying we aren’t responsible for our lives – we are. To paraphrase Marx, we all make choices, but not in conditions of our own choosing.

Recognising we are all products to some extent of our own environments (even if it is by opposing them) means that we should recognise those that have achieved a great deal, but also that there have to be limits on those rewards. JP Morgan (the banker, not the firm that bears his name today) use to have limits on the multiples allowable between the lowest and highest-paid worker in his firm. This seems entirely sensible to me. Let’s reward those who do well, but also recognise (in Cameron’s words) that we are in this together. Would it really hurt us to have a maximum difference of ten times salary between lowest and highest paid worker (which is actually more than Morgan allowed)? It might focus our attention on the lowest paid as well as the highest, and recognise that everyone in the firm has the potential to make a difference.

A second point is that we have to recognise the perverse effects of allowing corporate lobbying on the scale we now have. Robert Reich argues in ‘Supercapitalism’ that we should throw the lobbyists out of Washington and even goes as far as saying we should abolish corporation tax on the argument that this would remove the right of representation (no taxation without representation, and vice versa). He might well have a point. We need to remember that our representatives are not there to represent businesses, but communities. Sometimes their interests will overlap – many other times not. Governments should be selectively drawing on the expertise they need – not being lobbied by those with the most money and power.

A related point to this is that we should set a maximum size on what we allow corporations to reach. Once corporations reach a particular scale, they have power and influence so great that any idea about free markets goes out of the window. There’s a reason Roosevelt took on the massive corporations of the US a hundred years ago – he believed markets should be free from the dead-hand of massive corporate power, challenging them through anti-trust laws. Sadly, we seem to have forgotten his insights – if there was ever a time we needed to re-establish competitive markets which will work to the benefit of consumers rather than businesses it is now. Once businesses reach a certain scale, they should be split up and forced to compete with one another. The alternative is to see the depressing oligopolies that dominate our high streets and economies. Markets don’t work well unless we make sure those within them are following some basic rules – in order to be free, markets need to have some strong ground rules.

All of this isn’t rocket science. Asking firms to narrow the gaps between the best and worst-off, getting rid of corporate lobbying and limiting the size and power of business is all designed to make markets work better, and to recognise that we all deserve credit for firm’s successes. That’s what responsible capitalism looks like to me – harnessing markets for the benefit of us all, rather than for those who are lucky and privileged enough to work for massive banks, exploiting their monopoly positions and paying a select group obscene amounts as a result. That has nothing to do with free markets, and everything to with protecting the interests of those who already have money, interest and power.


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