IT IS the sort of debate that should, in fact, be taking place in India as it dips its toes into the hot waters of global capitalism, but until it does, let us hear it from the Europeans who, chastened by the 2008 economic crisis and still reeling from its effects, are wrestling with ideas to tame market forces.
The current debate is different from the one that immediately followed the banking crash when capitalism was declared dead, and sales of Das Kapital shot up. This one is not about jettisoning capitalism but making it work for ordinary people. It is about fairer wages, saner prices, affordable housing, and flexible family-friendly employment models. And unlike the post-2008 theoretical musings that left the general public cold, the ideas being discussed now have a resonance for people as they are able to relate to them.
In Britain, it has been dubbed the “standards of living’’ debate. Somewhat ironically, it is led by the Labour Party, which under Tony Blair famously argued that there was nothing to be embarrassed about being greedy. Labour, of course, was not alone in echoing the “greed is good’’ philosophy propagated by Gordon Gekko, the fictional fire-eating stockbroker in the film Wall Street . That was the settled view of much of the British political establishment.
But that was then. Today, the line is about protecting the “little guy’’ from corporate greed and its more overt manifestations. This, in fact, lies at the heart of the current discussion. For the first time, there is serious talk about confronting powerful businesses and holding them to account for their sharp practices.
Moves are afoot to curb excessive profits; break up monopolies; crack down on cartels; freeze prices of essential goods and services; force employers to pay “real’’ wages linked to the cost of living index and inflation; and stop such exploitative practices as “zero hour’’ contracts which allow them to keep workers at their beck and call.
In a sign as to where the debate is heading, six big energy firms, including British Gas, which controls the largest share of Britain’s domestic gas supply market, have been put under investigation over their seemingly excessive profit margins. The government has asked the competition watchdog to investigate their profits and asked it to consider all possible remedies, “including a break-up of any companies found to have monopoly power to the detriment of the consumer”.
“This is a significant issue for consumers out there who are struggling with their energy bills,” Energy Secretary Ed Davey said.
Banks are under growing pressure to reform and become more people-friendly or face crackdown. Labour leader Ed Miliband has proposed breaking up large banks and capping their market share to create greater competition so that customers have more varied choice. This follows widespread complaints about banking giants abusing their dominant positions and short-changing customers. In a major scandal, some of Britain’s biggest banks were found to have colluded to rig interest rates and “mis-sell’’ products such as payment protection policies to unsuspecting depositors.
The European Union has announced a series of measures to rein in the banking sector, including a cap on bankers’ bonuses. And the new tough approach seems to be working. Figures just published reveal that nearly 6,000 bankers, brokers and financial advisers have been sacked or suspended for “rogue’’ conduct in the past six years in Britain alone—amounting to “three every day’’, The Times pointed out.
The assault on banks is part of a larger campaign said to be designed to shape a “new economy’’ aimed at easing the “cost of living crisis’’ facing millions of common people affected by deficit-reduction policies in the wake of the financial crisis. As Miliband explained in a BBC interview, it is “about millions of middle-class families who never dreamt that life would be such a struggle”.
“Indeed, the greatest challenge for our generation is how to tackle a crisis in living standards that has now become a crisis of confidence for middle-class families,” he said, committing the next Labour government to a pro-consumer agenda.
“Unless you bring the consumer into the heart of these things, we are not going to get the change we need,” he said.
It is not only large multinationals and banks that find themselves on the mat. The entire corporate sector is under unprecedented scrutiny. For example, property developers who amass profits by simply sitting on their land and creating an artificial housing shortage have been put on notice. Either they build or risk forfeiting their land. Even individual property owners responsible for pushing up house prices are under pressure. There are calls for absentee landlords—mostly rich foreigners who buy property simply as good investment—to be slapped with extra tax.
The concern that personal greed in the name of free market and individual choice has gone too far is no longer restricted to the usual suspects on the Left. Consider this quote: “If you buy a property and don’t live in it, those are the people who should be taxed. Where you have an economy where the gap gets bigger and bigger between the rich and the poor, you have a big problem.”
It is not a left-wing politician talking but one of Britain’s richest businesswomen, the interior designer Kelly Hoppen.
State intervention in economic activity, once suspiciously regarded as “socialism through the back door’’, is now kosher. The Conservative Party, which came to power vowing to roll back the state, has had a Damascene conversion and is now championing the state’s role in defending the interests of the working class and the “squeezed’’ middle class threatened by arbitrary market forces. In an extraordinary intervention in the housing market, the Conservative-led government has launched a generous scheme to help people get on to the property ladder at a time when banks are reluctant to lend to those who do not have deep pockets.
Under the Help-to-Buy scheme, banks are being forced to change their mortgage policies. Now anyone who can put up a 5 per cent deposit against the value of the property is eligible for a bank loan. In return the government is guaranteeing to pay the lender up to 15 per cent of the value of the mortgage if the borrower defaults on the loan. Not surprisingly, the scheme has become hugely popular even as it has prompted fears of another housing bubble.
In another proactive move, it is aggressively pursuing private employers and pressing them to help unemployed youth find work by hiring them as apprentices and training them for specific jobs. In some cases, it is even paying companies to take on apprentices. Rather than being rolled back, the state is being rolled out into more and more areas hitherto regarded as spheres where the government had no business poking its nose.
On the face of it, these may seem like desperate measures to cope with a difficult situation, but in reality they represent a profound philosophical shift. The traditional hands-off approach to free market economy is giving way to state activism on a scale that would have been unimaginable a few years ago. The notion that deregulation, aggressive private enterprise and let-the-fittest-survive are the cornerstone of a vibrant market economy is wearing thin as inequalities widen, with a few at the top cornering all the benefits.
What is happening is a fundamental “reimagining of the purpose and shape of the state”, as one commentator put it. And this is happening not because the political class suddenly has had a “Eureka” moment but because it is under increasing public pressure to address the widening chasm between the top few and the rest of society. It is purely selfish reasons—the fear of a mass backlash and social instability—that is driving politicians. There is then the fear of losing elections. The harsh truth is that for all the money that the “enterprising “ capitalist class may be able to throw at political parties, the power to vote in and vote out governments remains with ordinary people. And these are the people who have been hit the hardest by the six-year-long recession. No wonder they are angry.
When the times were good, everyone had a job, and mortgages could be had for the asking, nobody really minded if a few benefited more from the boom than others. But when the times are hard, as they are now, disparities breed resentment, especially when the only ones who seem to be thriving are those who caused the crisis in the first place. Hence the wave of public outrage that is sweeping Europe with people demanding a systemic change—an end to corporate greed and abuse of the market passed off as free enterprise.
While it is too early to say how far the current debate will result in reining in a runaway economic culture, one thing is certain: it is no longer going to be business as usual.
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