veronica_milvus (veronica_milvus) wrote in uk_politics,

What next for Capitalism?

Ten years ago I had just finished an MBA at what is usually ranked the best business school in Europe.  While we were studying there was the dotcom boom and bust, so we did carefully consider the nature of capitalism and its foibles.  Lecturers with much more experience than me pronounced that (beyond complying with the law) the only duty of a company is to its shareholders; making money for the shareholders was the only way to progress as a company.  If the company is going well, more shareholders will want to invest; if it does badly, shareholders will withdraw their money by selling the shares, and investing elsewhere instead.  But once the company is floated on a stock exchange, the shares become a secondary market. like buying a second hand car. I could sell my car to you for whatever value it has, and Audi would not get a penny from either of us; the price becomes a proxy for reputation and quality.  In the case of shares, the secondary market price reflects the probability of getting a regular dividend out of the company's profits.

What you can see here is that monetary rewards are operated not by the company, but by the shareholders looking for a return on investment.  They wield the yardstick by which companies are judged; not the CEOs or the stockbrokers, and investment bankers have a duty to make as much money as possible for the investors - like you and me - who put their life savings or their pension funds into stocks and shares.

Money is literally the only measureable currency we have. Unfortunately, our society is not capable of rewarding people in other ways.  If somebody suffers a terrible injury that is somebody else's fault, the damages awarded are financial.  You might like to award them compassion or sympathy or practical assistance, but these cannot be mandated.  All we can do is give money and hope that the victims will be able to buy whatever they need with that. (It's not possible though - i struggle to think how I might get my FIL's sheets changed or sweaters washed or letters opened and answered if I had to pay somebody to do it - maybe there is a business opportunity there.)

The trouble with capitalism is exactly that the shareholders roam around the financial landscape maximising profits.  They move their investments from one company to another depending on who is up and who is down, thus providing a competitive, almost Darwinian, element to investment.  A company that wants to retain its investors has to run faster than its peers, so the pressure is on to sell more, move into new markets, invent new products, new flavours, better mousetraps.  It never stops, and therefore the pressure on consumers to consume more and better Stuff accelerates.  In order to keep that going, consumers have to be motivated by greed or status insecurity to even go into debt to get the Stuff that other people have, and marketeers exploit our basic monkey-hierarchy needs to eternally push us beyond the Joneses.

Other useful values like community, and craft, and pride in one's work, and Art, and interesting ways to spend one's time, all get subsumed into the urge to have and to spend.  Those able to earn money are flogged to death by companies that want them to be on call "24/7". Various social problems erupt as a less earnings-capable underclass, which can never afford any of this valued Stuff, gets anxious and depressed and militant.  Although capitalism is the cause of good customer service, and pension provision, and consumer choice, and other Good Things, it is now causing more problems than it alleviates, and if you want any more on that subject, read The Spirit Level or join the Equality Trust.

I can see that we are at the point where Capitalism needs to be changed in some way, but I wonder whether it isn't inherently prone to whipping itself into this kind of vortex.  All the critics of various political persuasions see this too, but nobody seems to be postulating what we could have instead.  Trouble is, there is no meaningful way of measuring the value of happiness or community or personal fulfilment, and only very abstruse ways of measuring health benefits (you might like to Google the QALY).

What kind of economic system could provide people with "enough" without cattle-prodding them into wanting it all?  I'm unwilling to accept that Communism or Socialism in its strictest forms could be the answer.  There was an experiment once where Europe was divided into two, and the rats on one side put into one kind of maze while the rats on the other side were put into a different one.  After a while, the rats on one side ate through the wall that divided the lab because they hated their maze so much.

So what should be the New Order?
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