WHEN the obituary of neoliberal capitalism is written – as I’m confident it will be within the next decade or so – Royal Bank of Scotland will merit a chapter all on its own. Up to its neck in sub-prime mortgage lending in the US, it was a major figure in the 2007 financial crash, during which its toxic balance sheet was found to be larger than the GDP of the entire UK.
Then, after RBS had been bailed out with taxpayers’ money, it continued to give capitalism a bad rep, ruthlessly exploiting the small businesses who were suffering from the post-crash recession it had helped create. This was confirmed in a revealing internal RBS memo from 2009 which urged managers to let struggling small businesses “hang themselves” so that the bank could pick up their assets at rock bottom. The now notorious RBS Global Restructuring Group was condemned in the House of Commons for “the largest theft anywhere”, and for ruining thousands of viable companies.
The current RBS chairman, Sir Howard Davies, says that the Public Finance Initiative was a “fraud on the people” and he should know because Royal Bank was one of the biggest names in PFI in the noughties. A National Audit Office report recently confirmed what readers of the Sunday Herald have long known, that the PFI contracts for building and running schools and hospitals are around 40 per cent more expensive than orthodox public procurement. This means around about £200bn in public funds is being diverted to pay for the houses, cars, private schools and investment portfolios of managers and shareholders of the various PFI schemes. Enthusiastically adopted by Tory and Labour governments since the 1990s, these public private partnerships have been revealed as an ingenious scheme for enriching the business elite by diverting money that should have gone into public services.
No-one should be surprised at this. It is how business has learned to behave in the era of what some have called “turbo-capitalism” – the unregulated, low-tax, bandit capitalism of the last 35 years. A succession of scandals – the Panama Papers, the Paradise Papers, PPI, endowment mortgages, private pensions – has fatally undermined capitalism’s moral claim to be the fairest and most efficient economic system. But the very visibility of these fraudulent activities now constitutes a real and present danger to the future of the capitalist system as we know it.
Take the privatisation mega-corp, Carillion, which was also heavily involved in PFI and has been one of the leading agents in the “outsourcing” of public services. It has now gone bust putting at risk the welfare of some 40,000 dependent businesses and their employees. Effectively an arm of the state, Carillion represented the most blatant form of toxic collusion between government and the private sector. The managers of Carillion, who paid themselves inflated salaries and bonuses even when the company was effectively bust, were just doing what comes naturally. Money is its own justification. Most have salted away their fortunes, and moved on – but the public, who paid the price, have not.
It is not just public sector outsourcing but the entire neoliberal policy – religion almost – of privatisation that has been exposed. Look at the state of the railways in the UK, privatised in the 1990s when it was naively assumed that private capital would, almost by definition, run things better than the state. Utilities like rail, gas, water and electricity, are essentially natural monopolies. State monopolies are often inefficient, but the promises of privatisation have simply not materialised for consumers, as they realise every month when they open their energy bills. Most voters now want utilities such as rail taken fully back into public ownership.
Capitalists focus relentlessly on the bottom line, so it is ironic that they have signed their own death warrants. But there’s nothing so blind as human avarice. Our degenerate business class seems incapable of understanding why voters are so incensed at their behaviour. They persuade themselves that they are “wealth creators”, when it is patently obvious that they’re simply syphoning off wealth created by society as a whole.
Some entrepreneurs are arguably wealth creators. For the two centuries following the Industrial Revolution, capitalism was the most innovative and productive economic system in human history, as Karl Marx observed. Even today, capitalists like Elon Musk of Tesla or the late Steve Jobs of Apple, bring great products to market, though in both cases they were heavily underpinned by direct and indirect public investment. But the people manipulating Libor rates in the City, setting up hedge funds, selling sub-prime mortgages, running PFI schemes etc are simply parasites. Britain’s managerial class today is about as entrepreneurial as Homer Simpson. They’re mostly dull-witted accountants who’ve sat on their bottoms for 20 years.
Even as they were creating the greatest financial crisis in a century, City bankers persuaded themselves that they were worth every penny of their absurd remuneration. They still do, having learned nothing. Neoliberal capitalism has been defined by globalisation and the growth of a plutocratic international elite which has cut itself off from the rest of society. Soft larceny has become an entire management culture. Even university vice chancellors and public sector bureaucrats have taken to paying themselves ridiculous salaries on the grounds that they too must be “worth it”.
Well, here’s the news: they aren’t, and everyone knows it. These are no captains of industry; they are pirates in suits who’ve been tolerated far too long. The UK economy is in a terrible state, even without Brexit and wages have been stagnant for over a decade. The housing market, which is both a consequence and a cause of gross inequality, is a national disgrace. It has become a Ponzi scheme to enrich the lenders by bidding up the price of housing while artificially restricting supply. London property has meanwhile become a bricks-and-mortar bank in which the management plutocrats stash much of their loot.
The beneficiaries of this kleptocratic capitalism are hiding in plain sight. And I believe their time is nearly up. In the 19th century, plutocrats could protect their wealth behind laws largely drawn up for the benefit of the wealthy. The poor had no lawyers. But today the poor have the vote, and lawyers, and there is no way this kind of structural inequality can survive in the 21st century, short of the extinction of popular democracy. Eventually, people will vote for change: for a society in which wealth is spread more equitably, and in which public services are run in the interest of the people who pay for them.
I don’t know if Jeremy Corbyn is going to be the agent of this change; I suspect he is too old. But behind him lies an entire generation of educated young people who have no stake in the system as it stands. Their parents accepted regulated, post-war capitalism because it offered them secure jobs, pensions, cheap houses, free higher education. Millennials have seen all that swept away as corporate capitalism’s thirst for profit became insatiable. They will be the grave-diggers of the system, and while it may take a decade or so to be buried, this era of capitalism is already a dead parrot.
A version of this piece appeared in the Sunday Herald