Moral capitalism - where the purpose of banks is to support industry, not gamble

An interesting article from the Guardian ...

"To convert the business man into the profiteer is to strike a blow at capitalism … The business man is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society."

Can we create a morally acceptable form of capitalism; and if so, what would it look like? Faced with a decade of hardship apparently caused by the greed of a few, people are asking whether bankers are no more than profiteers, and whether inequality has risen too far. Even the former US treasury secretary, Lawrence Summers, and former head of the CBI Richard Lambert, have said we need to do better on inequality.

The quote above, however, comes not from anyone today but from John Maynard Keynes, in 1923, during the postwar turmoil in the financial markets. There was hyperinflation in Germany, a collapse of the Mark, chaos on the foreign exchanges as prices had gone up and down, and violent fluctuations in employment.

Like many of those who turned to communism and fascism, Keynes had strong moral objections to capitalism – but he consistently repudiated socialism, communism, and fascism, for he believed that capitalism was essential both to create high standards of living and to guarantee personal liberty. In effect he sought a capitalist revolution.

For Keynes, the sustainability of capitalism was not only a technical question but a moral question – because if capitalism is to survive, people have to believe it is a system worth supporting. His priority was to eliminate unemployment. It was also a moral priority to design an international monetary system that would reduce the chances of capitalism descending into chaos again. And to do that, economists had to grapple with difficult technical details, but their motivation was a vision of a better capitalism.

We face the same challenge today – to develop a morally acceptable form of capitalism. As Keynes feared might happen, much business is now seen as no more than profiteering. Many people object to the bonus culture of the banking system because they don't believe those bonuses are earned. We have also learned that inequality not only undermines the legitimacy of capitalism (that was Keynes's concern) but it has corrosive effects: unequal societies are unhappier, less healthy, and have more crime.

We cannot wind the clock back, but we should not be afraid to look to the past for ideas. It is hard to make a clear distinction between profiteering and legitimate business activity and yet, throughout history, there have always been limits on what can be bought and sold in the market. Perhaps the boundaries between legal and illegal activities need to be reconsidered; perhaps derivatives need to be better regulated – or simply banned from banks' portfolios. Creating a more stable banking system so that banks do not need bailouts would help maintain high employment and tackle inequality.

We can also look abroad. A decade ago it was common to look to Scandinavia or Germany and to compare their institutions with ours. Now "Anglo-Saxon" capitalism has lost its shine, perhaps we should reconsider whether we can learn, for instance, from Germany, with its system of industrial democracy and a banking system geared up to support industry, or try to find out why the gap between rich and poor is much narrower in most of Europe.

One reason for the problems we face today is that we have stopped seeing taxes as an essential institution in a capitalist economy for if taxes could be raised, especially on those who can most afford to pay them, public services would not have to be cut. We should see taxes as an integral part of a moral capitalist economy, providing health, education and social care outside the market. People should not be afraid to join Warren Buffett in saying the rich should pay more tax. The "Tobin tax" on financial transactions should not be seen as a way to raise funds for the euro, but as a tax that could help stabilise the financial system and as a "Robin Hood" tax.

Such changes need to be analysed carefully, for technical details do matter, but they need to be on the agenda: if we are to save capitalism, as we must if we want prosperity and liberty, we must face up to its moral failings. Unless we do this, we will be unable to imagine a better future, let alone work out how to achieve it.

... and IMHO with the collective actions of UK bankers summarised as legalized counterfeiting, robbery, extortion and gambling ... coupled with their continual threats and heavy handed lobbying/bribery of politicians, it is going to take a sea-change for any morality to enter Britain's banks ... German leaders do not stand for it (and look at how they are prospering, despite having to prop up the rest of Europe!) so why do we? Well I guess the answer to this revolves around the fact that these legalized 'muggers' can only mug 'mugs'!

Tax the Rich more and the Poor less ... say the Rich in France

Following on from similar comments by US Billionaire Warren Buffett, the rich people of France have called upon their Government to tax them more in order to turn the economy around ... 

... in a letter, signed by some of France's most high-profile chief executives, said: "We, the presidents and leaders of industry, businessmen and women, bankers and wealthy citizens would like the richest people to pay a special contribution ... in a spirit of solidarity" and the French Government is acting accordingly (with an extra tax of 3% on income over 500,000 euros) ...

So why in Britain do we have George Osborne, Boris Johnson and the rest of the Conservative party trying to argue that to escape from our economic problems we need to tax the rich less (i.e. they want to get rid of the 50% tax rate for incomes over £150,000) and tax the poor more (whilst helping them a lot less) ?  

Is it that they know 'better' ... or is it pure selfishness and greed on behalf of themselves (they are all millionaires) and their rich friends?  IMHO this isn't a hard one to work out ... pretty obvious really ... however the problem is most people in the UK are either ignorant or apathetic about it ... so these corrupt 'spin-doctors' (who are trying to push the 'ultimate con' - namely 'trickle-down' economics) think they can get away with it!

The Conservatives try to tell us we "are all in this together" (whilst the truth is in fact the complete opposite) whilst the French don't just talk about, they stand-up to be counted, speak out about solidarity and what is needed to really turn things around, and act upon it!

Tax the Rich more and the Poor less ... says US Billionaire

Warren Buffett has today called for the US to make him and his "mega-rich friends" pay more income tax. In an article for the New York Times newspaper, the billionaire investor and philanthropist said the rich should do more to help plug the deficits.

He called for a tax rise for those earning more than $1m (£600,000), and a higher rate for those on over $10m.

In a rebuttal of arguments made by Republicans, he said tax rises would not hurt investment or jobs in the US and he told the Government to "stop coddling the super-rich".

"Our leaders have asked for 'shared sacrifice'," he wrote. "But when they did the asking, they spared me."

Mr Buffett explained that, like many top earners, his income came entirely from investments rather than from employment, which are subject to lower taxes in the US. He said last year he paid an effective tax rate of 17.4%, less than the 33% to 41% paid by the employees in his office.

He dismissed arguments made by senior Republicans, including John Boehner, speaker of the House of Representatives, that taxing higher earners more would damage investment and job creation in the US.

"I have yet to see anyone... shy away from a sensible investment because of the tax rate on the potential gains," he said, adding "People invest to make money, and potential taxes have never scared them off". 

He pointed out that the effective tax rate paid by the highest earners was much higher in the 1980s and 1990s than in the last decade, and yet job creation was much higher in the earlier decades.

His proposed tax rises would not affect 99.7% of taxpayers, he claimed, adding that a 2% payroll tax cut passed in December should stay in place to help the poor and middle classes.

Warren Buffett's message is clear ... tax the rich more and the poor less ... and tax investments more (an example of 'money from nothing') and cut the tax on jobs ... as recommended in my last post ... and Buffett's message is the complete opposite to, and pours total scorn upon, Boris Johnson's and George Osborne's demands to cut the top rate of tax too. 

Their request is nothing to do with boosting the economy ... but everything do with lining their own pockets (they are both multi-millionaires) and the pockets of their ultra-rich friends ... at the expense of everyone else. Buffett's comments also show the hypocrisy of these people, especially when they also use a strap-line like we are 'all in this together' ....

Ignorance is unfortunately not bliss and, as we saw last week, is only going to create more trouble ...