Cover of MoneyWeek magazine issue no 557


30 September 2011 / Issue 557

Central bankers are running out of options


  • A cheap oil explorer to buy now
  • Alistair Darling on what he'd do if he were in charge
  • Why you should hang on to gold


Ed’s moralising is naive

Ed Miliband thinks you can divide firms up into good and bad ones and that you can then regulate and tax them accordingly. Some are producers and some are predators/asset-strippers.

You’re probably wondering how one decides which is which. Take the business interests of someone such as Andrew Rosenfeld. Rosenfeld, the FT tells us, has recently returned from spending five years in Geneva as a tax exile. He is also a “property tycoon” and back in 2005 came under fire for refusing to accept any responsibility for the £68m pension deficit at retail chain Allders on its collapse (he held a large stake). Legally, all this is fine, but nonetheless if I was sitting on one of Miliband’s quangos and I had a little good/bad check list in front of me, I’m guessing I’d end up classifying Rosenfeld as a predator. But once you start down the path of making moral judgements on perfectly legal businesses doing perfectly legal things, where do you stop?

Is private equity a predator or a producer? Our check lists might go for the former. But as Allister Heath points out in City AM, “for every failure of private equity, there are numerous case studies that have ended up as job-creating turnaround stories”. And what about, say, property developers? Are they predators because they buy something and sell it on for a higher price? Or producers because they employ tradesmen and decorators and provide nice places for people to live? What is someone like, say, Warren Buffett? Everyone thinks he is just grand, but Berkshire Hathaway exploits long-term valuation anomalies. It doesn’t build businesses.

• Read the full editor’s letter here: Ed’s moralising is naive.