Read the papers and you will see nothing but misery about how divided Britain is – we can, we are told, agree on nothing. It isn’t really so. There is one thing that almost everyone agrees on: that the world’s very big companies are a problem. I moderated a debate between the FT’s Martin Wolf and Yanis Varoufakis last week. They come at their critiques of capitalism from completely different angles; but a large part of both of their anger was channelled in the same direction.
Yanis railed against the “rise of networked mega-corporations” and mega-banks into a “highly concentrated, obscenely powerful power grid”. By the middle of the Noughties, he said, 65 of the 100 wealthiest entities on Earth were “financialised corporations, not states”. How could anyone expect such organisations “to operate in synch with society’s values and priorities”? Martin described the increasingly obvious sharp increase in concentration and declining competition, and a “rise in both monopoly and monopsony”, as one of the “true failures” of today’s corporate capitalism.
The Labour Party is on it too – while his solutions to this kind of thing are generally absurd, shadow chancellor John McDonnell is quite right to point out, as he did this week, that for example, our big four accountancy firms now represent an unattractive oligopoly.
The biggest threat to capitalism
However, for one of the best recent descriptions of how the mega-corporations have let us down, get a copy of Liam Halligan’s new book, Home Truths. It focuses on the housing market and the lack of competition within it (the big housebuilders are now effectively an oligopoly). But in the conclusion he makes one key and, I think now, entirely uncontroversial point: the greatest danger to capitalism is the rise of powerful established industry players “who are able to lobby governments and defend and extend their market dominance by preventing meaningful regulation and reform that maintains broad political consent for ‘the system’”. (We’ll have more on this in next week’s issue, when our own Stuart Watkins will be looking at the way in which perverse incentives for company management have killed productivity in the UK.)
Given that everyone agrees on much of this, regardless of on which side of the political debate they sit, I would like to think that once this election is done and dusted, we might see some effective and free-market-friendly action to sort things out. Here’s hoping (rather than expecting).
Focus on what really matters
For now, investors should focus on investing in the ways least likely to be affected by the uncertainties of UK politics. In this week’s magazine, John Stepek gives his take on the return of value investing. It might really be back this time. Then read Richard Beddard’s piece on how to find stocks you can buy and hold through many elections to come (he has five favourites for you). The more you can do this – and the less time you are spending frantically trading – the more time you will have to ponder the trends that really matter. This, according to Jim Simons, founder of one of the greatest money making machines in Wall Street history, “turns out to be a pretty good approach”. And probably not just for investors.