Has Capitalism Fundamentally Changed?

Today’s headlines scream abuse with one accord at the latest bailed-out company insisting on paying grotesque bonuses. The Financial Times is the most reserved with “Outrage at $165,000,000 AIG Bonus Payments” adding that the Obama Administration expresses its anger.

So things are slightly different in the United States. The new Government is prepared to condemn such outrageous behaviour from financial institutions which have got us into this mess, after being bailed out at huge expense to the tax-payer, yet still want to grab last year’s bonuses.

That this grotesque acquisitiveness is now such a set pattern makes me wonder whether something much more fundamental is afoot.

Is it, I wondered, walking back after buying the FT, that the nature of capitalism has changed in a fundamental way.

Our economic text books taught us about entrepreneurs being driven to make great fortunes and, hopefully, benefiting the rest of society.

Then came the revisionist stage where the Labour Cabinet Minister, Tony Crosland, popularised academic work emphasising the roll of managers that now controlled these vast industrial empires.

These managers would be well paid; they would get many more times the salary of an ordinary worker, but still inhabit the same planet.

Latest figures show that the industrial leadership now gets not ten times or a hundred times the average wage but three hundred times, as shown below.

  © Financial Times

Is this the new stage of capitalism that managers now expect to make great fortunes as did the entrepreneurial class? If it is, it perhaps begins to show why there is such brass neck resistance to any modification to their grotesque bonus system.

Lord Lawson, a one-time Tory Chancellor, writes in today’s FT to support the campaign Liam Halligan has been spearheading for a reintroduction of the Glass-Steagall Amendment which the current head of Obama’s economic team did so much to destroy back when Bill Clinton ruled the waves.

Lord Lawson argues that it is only when there is a crisis in the commercial or retail banks that the economy is so adversely affected.

Preventing retail banks undertaking the functions and the risks of investment or merchant banks is a crucial reform towards which we should be aiming.

Lord Lawson also puts his finger on this change in attitude which I have been describing. “We now live in an age in which the acquisition of wealth appears to count for more than reputation.”

If Lord Lawson is right, and the thirst for wealth is a greater motivation than being regarded as a good upright citizen, then one of the most significant changes imaginable has taken place in human society.


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