By Michael
Faulkner – 27 September 2009
A year ago
the collapse of Lehman Brothers, the biggest corporate crash of all time, led
to the onset of a crisis in the global financial system of such magnitude that
without an 11th hour bailout of some of the world’s leading banks,
the whole global financial system would have crashed. As had been the case following the Wall
Street Crash of 1929, it was widely and solemnly opined that nothing like this
must ever be allowed to happen again. For a time the spotlight was directed on
the arcane world of international finance. The system that had come close to
collapse had to be propped up with trillions of taxpayers’ money was exposed as
something resembling a giant Ponzi scheme.
In Britain
the New Labour government under Blair and Brown spent eleven years praising and
promoting the bankers whose activities were to bring the financial system to
the brink of disaster. For their “innovative risk-taking” many of them had been
rewarded with knighthoods to dignify the purely pecuniary rewards they awarded
themselves in multi-million salaries and bonuses. Some of the bankers
grudgingly said “sorry”. They were sorry that things had not worked out as they
had expected, leaving it to be inferred that this was through no fault of
theirs. During the past year as the recession has begun to bite and
unemployment has topped 2.47 million, public anger has not abated. The view is widespread that no real
lessons have been learned from this crisis. Whereas a year ago the government was promising radical
reform of the financial system and pledging that the culture of greed and
excessive bonuses would be reined in, today they appear to be reading from a different
script. The proposal from the think tank Compass that there should be a “Top
Pay Commission” to investigate top salaries ( like the Low Pay Commission which has advised the
government on the minimum wage) has been rejected by Alasdair Darling who has
also refused to act to curb the payment of obscenely high bonuses. Claims that
the worst of the recession is already over have led to the sense that it will
be a “return to normal” – to “business as usual”.
There are
signs of “recovery” in the housing market, leading estate agents to hope for
another bubble. Here, return to normal will have been achieved when house
prices return to the grossly inflated levels they had reached at the end of
2006. Never mind that by this time
next year unemployment will have reached 3 million and that a million 16 to 25
year olds leaving school and university will find no work, and because of the
expected cut back in already minimal provision of social housing, will be
unable to find anywhere decent to live.
On the
other side of the divide the lives of many of those responsible for the
disaster have hardly been affected. A recent Observer editorial (13.09.09) succinctly listed what
it described as “certain habits of British capitalism: avoid paying tax;
maximise short-term personal gain; hide poor performance in a web of technical
complexity; seek exorbitant remuneration while avoiding personal accountability
for risky ventures; care nothing for the wider social or economic consequences
of one’s actions.” This is a
minimal description of the modus operandi of the Olympian “masters of the
universe”, until recently so highly regarded and rewarded by the government for
their contribution to Britain’s economic growth. Their contribution is well illustrated by the case of the
“Phoenix Four”, a consortium of businessmen who “bought” the loss making MG
Rover from BMW for £10 and ran it (into the ground!) between 2000 and 2005. The
consortium used an interest-free loan from BMW to enrich themselves rather than
save MG Rover. They set up a holding company which lent the money to MG Rover
with interest. Instead of investing the loan in the company they used it to
feather their own nest, milking the company of millions. Additionally they set
up various tax and share schemes and other transactions for their own pecuniary
advantage. A report into the affair concluded that the Phoenix Four plundered
their own company, but the Serious Fraud Office considered that there were no
grounds for starting criminal proceedings against them. The government has
always been remarkably relaxed about the activities of businessmen such as the
Phoenix Four. The Observer commented: “The whole affair reads as a parable of
New Labour’s relationship with money men: credulous when it should have been
sceptical; bamboozled by the intricacy of modern financial transactions; torn
between fear of job losses and fear of “anti-market” industrial subsidies;
looking at every problem as an exercise in short-term political damage
limitation; unable to distinguish between entrepreneurship and rapacious
greed.”
In spite of the financial melt-down and
the culture of extreme avarice that it exposed, there remains a reluctance to
tackle the issue of executive pay. Peter Mandelson’s admission that New Labour
was very relaxed about people becoming filthy rich, set the tone of the
government’s relations with the banks and the boardrooms after it came to
office in 1997. The Guardian newspaper’s executive pay survey, published this
week, makes interesting reading. Consider this. In 2008 the highest paid
executive, Bart Becht of Reckitt Benckiser, a multinational company based in
Slough, made more than £36.5 million. The average wage of his workforce is £26.700 - roughly the national
average, which means that Becht is paid 1.374 time more than the average
worker. The Tesco CEO, Sir Terry Leahy was paid £9.07 million which is 907
times as much as the average Tesco worker who earned just £10.000. The average
FTSE 100 chief executive salary is 100 times greater than that of a school
teacher. This gross inequality of
incomes has grown over the past twelve years of New Labour government and,
despite the economic crisis, there is no sign that things are about to change
for the better.
How do the
recipients of such colossal fortunes justify themselves? They are very seldom
called to account so we don’t get to hear anything they may have to say in
their own defence. But over the
past twenty years or so the case against such grotesque inequalities has seldom
been allowed a hearing. More than
a hundred years ago, the American sociologist Thorstein Veblen subjected
members of the ruling class of his day to a thoroughgoing critical study in
“The Theory of the Leisure Class.” It would be interesting to read what a twenty-first century Veblen would
have to say about today’s super rich and those who strive to achieve that
status. He might conclude that like their forbears, members of this class
regard their success in acquiring enormous fortunes as part of the natural
order of things. For the most part they inhabit a world totally divorced from
that of ordinary mortals. Unlike many members of Veblen’s “leisure class” the
modern Olympians do not necessarily make a conspicuous display of idleness.
Those such as the Russian oligarchs who have accumulated fabulous wealth by
plundering state property, or those who have siphoned off multi-millions in
financial deals and bonuses through short-selling or trading in “derivatives”,
no doubt imagine that their very success in these ventures is proof of their
superiority to the great mass of humankind who are too dim to avail themselves
of such opportunities. They see themselves as paragons of the possessive
individualistic spirit, noble champions of what they regard as a
social-Darwinian law of human nature. They take for granted that they deserve
to be remunerated as they are because they suffer from the delusion that their
activities are absolutely essential to the general good and the national
interest. If one suggested to them that the same argument might be made for the
work of teachers, social workers and others, such a suggestion would be
dismissed with disdain. That they neither know nor care about the lives of
those below them, from whom they choose to be hermetically insulated, does not
disturb them in their delusion. When they protest that closer regulation of
their destructive activities will result in them taking their talents elsewhere
where they can continue to make their millions unimpeded, they see no
contradiction between this sentiment and their claim to be serving the national
interest. When, as a result of the financial collapse their behaviour has
created, millions who would otherwise still have jobs are cast onto the
scrapheap, they feel no responsibility for this whatever.
The Random
House dictionary describes the psychopathic personality as one “characterised
by amoral and anti-social behaviour – extreme egocentricity; failure to
learn from experience.” More than
fifty years ago the psychoanalyst Erich Fromm, in his book “The Sane Society”
dealt with the psychopathology of a society driven by acquisitive individualism – a society he
considered insane. In Britain today, the super-rich admirers of the work of
their court artist, Damien Hirst – himself worth £100 million - have been
bedazzled by his latest offering – a diamond-studded human skull which
cost £10 million to produce and is said to be worth £50 million. Perhaps it should be regarded as a
symbol of the age. 