Once again, a number of big banks – including RBS – have been caught in the act. This time, the act in question is rigging the foreign exchange market.
Iain Martin, a stalwart defender of capitalism, feels more than a little let down:
“The most jaw-dropping aspect of the foreign exchange scandal, for which some of the world’s largest banks were ordered yesterday to pay enormous fines, is that the miscreant traders continued their activities after their jobs had been saved by the taxpayer.
“Put to one side the wisdom or otherwise of the bank bailouts themselves. Here were traders who had watched other banks go under and then had the institutions in which they worked rescued with hundreds of billions of aid paid for by their fellow citizens via the government.”
Alternatively, one could take a more blasé attitude: Yes, the banks have been naughty, but Britain does very well out of its forty per cent share of the global foreign exchange market – so let’s just take the rough with the smooth. Moreover, given that the guilty banks have been hit with fines amounting to £2.6 billion, it’s not like they’ve got off scot-free.
The trouble is that talk of zillions and squillions isn’t going to convince the general public. The fines may be big and the tax revenues even bigger, but you don’t win arguments with numbers that have no meaning to most people.
Ultimately, the fight for free markets comes down to emotion not economics, the heart not the wallet. This is how Chris Deerin puts it in a must-read column for the Scottish Daily Mail (available here on his blog):
“I do wonder whether we’ve all become a little too hung up on numbers, formulae and logarithms. An economy isn’t just an arid set of figures on a spreadsheet, it’s a cultural thing, too. It helps set a tone, speaks to our priorities and motivations and how we relate to one another. Therefore it stands to reason that the behaviour of major players within it matters.”
The stakes are getting higher:
“Lip service is no longer enough if the reputation of capitalism is to be repaired. The permissive political climate that has existed for business since the Thatcher reforms of the 1980s is under attack, a revolt led not by politicians but by voters. Horrified by the corruption and incompetence shown from Westminster to the Square Mile to Fleet Street – and this under a system that was said to be the settled will of humanity: remember the End of History? — they are increasingly lured by the siren voices of extremist parties that promise something different and better. Unrealistic, yes, but also idealistic, optimistic and romantic.”
In the immediate wake of the financial crisis there were fears that public opinion would turn sharply towards the left. It didn’t happen – but that doesn’t mean the danger is over. Indeed, we now see parties of the populist left gaining ground in several countries: the SNP in Scotland, Sinn Fein in Ireland, Podemos in Spain and SYRIZA in Greece.
Furthermore, a number of supposedly rightwing protest parties also contain some distinctly anti-capitalist elements – including our own dear UKIP. There is, of course, nothing wrong with reforming capitalism by taking on vested interests, but economic protectionism, nationalisation and envy taxes are not about reform.
The response from the political establishment is laughable. In America, we have the grotesque prospect of a Clinton versus Bush contest in 2016. In Europe, it was decided that that best candidate for President of the Commission was the long-serving leader of a tax haven. Meanwhile, in Britain, the big idea for reviving the fortunes of the Conservative Party is to replace one old Etonian leader with another. It’s almost as if the mainstream politicians are daring their electorates to rebel.
Faced with such monumental cluelessness, the only people left to rescue the reputation of capitalism are capitalists. But how?
Courtesy of Chris Deerin, here’s a little list:
“Pay the taxes that are reasonably due… Knit yourself into the communities where you’re based…take a chance on poor kids with potential. Be transparent to the maximum degree possible…Do not involve yourself in cartels and monopolies but pursue genuine competition and innovation.
“Treat workers fairly; if you can, pay the living wage. Keep an eye on the executive-to-employee pay ratio and ensure the rewards for those at the top are tied to sensible, sustainable incentives… Put your customer first, whether you’re an energy company or a bank or whatever: don’t leave them with the feeling they’re being conned.”
Now, that’s a manifesto for popular capitalism – and, done properly, a pretty good business model too.