EDITOR'S LETTERMerryn Somerset Webb
Capitalism needs you!
Has capitalism failed? Is modern economics broken? Do we need a new system? This topic has been debated over and over again – on radio, TV, and in my neighbours’ kitchens. It’s been kicked off by the film The Big Short. It’s been given momentum by the hypocrisy of the annual schmooze fest in Davos. And in the UK it’s been turbo-charged by Google’s sweet tax deal (which may or may not have them paying tax at an equivalent rate of 3%) and Tesco’s general nastiness towards suppliers. So is capitalism really broken? Of course not.
Capitalism is not just the best system we have found so far – it is our default system. But while it isn’t broken, it’s more corrupted than usual by the huge concentrations of power within very large firms – companies that can exploit globalisation to cut tax bills, welfare systems to pay super-low wages, and supine shareholders to extract millions of unearned pounds for managers every year. This is wrong in itself. But it also erodes long-term trust in a system that has long served us all well.
We’ve written before about what might help fix this. We need lower barriers to entry and more competition in businesses dominated by the few (banks and supermarkets, for example). We need more transparency on lobbying – who gets access to our politicians and why? We need a system that relies less on debt.
And long-term shareholders must ensure that global companies behave: I bet everyone with big stakes in Tesco wishes they’d paid more attention in the high-profit days. If they had realised the money was being made on the back of poor treatment of small suppliers, then priced in the business cost of that bad PR, would they have allowed it to happen?
• Read the full editor’s letter here: Capitalism needs you!