The Billionaires' World

 Putin’s invasion of Ukraine has, almost inevitably, dredged up the only historical analogy most people are capable of making – that of the appeasement of Adolf Hitler before World War Two. Sun columnist Piers Morgan – who according to the adverts ‘says out loud what most people are thinking’ – has dutifully obliged with the Neville Chamberlain vibe. But according to many American politicians it’s just like 1938 all over again …. again.

Actually, and more worryingly, the most apt historical echo is not the Second World War but the First, when a group of states who had, ideologically much in common, slogged it out for four long years over a cause few could remember, resulting the deaths of around 20 million people.

On the eve of the 21^st century, the Italian historian Domenico Losurdo recalled the 1910 funeral of Edward VII of England. It was, he wrote, “the occasion for a splendid procession which saw kings, hereditary princes and dukes, united by ties of kinship and common mourning, parade on horseback. Time seemed not to have made the least dent in the power and prestige of the European aristocracy. Nine monarchs, all descendants of William the Silent, occupied the stage …”

Yet a little over four years later, these same countries were dragged by a series of alliances into, at the time, the most destructive war in world history. These were resolutely capitalist nations – often officially led by people related to each other – that had, over the previous 30 years, taken possession of over 8.6 million square miles of Africa and Asia in the name of progress and trade. They were, on the surface, united by racial, economic, political and familial ties. Nonetheless these countries were plunged into insane nationalistic fervour and a seemingly endless fight to the death.

Of course certain ideological differences were stressed. Britain, France and, latterly, America – the Entente – were presented as bastions of liberalism in contrast to the militarism of the other side (Germany, Austro-Hungary and the Ottoman Empire). But the Entente was also allied with Tsarist Russia, an absolute monarchy, police state and profoundly anti-Semitic regime.

Likewise today, Patriarch Kirill,  the head of the Russian Orthodox Church, has backed Putin’s invasion on the grounds that it is a “metaphysical” struggle against immoral Western values (such as LGBT rights and same-sex marriage). At the same time, however, Boris Johnson has scuttled off to Saudi Arabia to beg for more oil from that erstwhile British ally, which happens to be an absolute monarchy and beheaded 81 people prior to his arrival. And which, in addition to visiting hell upon neighbouring Yemen, is also probably the most anti-Semitic regime on earth. Such does history rhyme.

In the current world the ties that don’t bind are not based on monarchy, aristocracy or Empire. Rather the common denominator across liberal, conservative and authoritarian countries is the dominance and ubiquitous presence of the ultra-rich. In 2021, there were 2,755 billionaires in the world, 660 more than the previous year. During 2020, a new billionaire was created every 17 hours. Billionaires are, collectively, worth $13.1 trillion, up from $8 trillion just 12 months previously and less than $3 trillion in 2006. To give a sense of perspective, a billion is a thousand million.

Their mere presence inevitably dominates and skews the societies they inhabit – be it the U.S, Britain or Russia. It is widely known, for example, that Russian billionaires – the infamous oligarchs – were created after the collapse of communism through the process of “voucher privatisation” which enabled a small group of people to acquire former state assets and amass stupendous wealth. But the number of Russian billionaires has, in common with the rest of world, dramatically increased in the 21^st century; from several to over 100. They are taxed at just 2 per cent more than the rest of the population (and this increase was introduced in 2020!), while the rest of the country is subjected to austerity.

Venerated Ukrainian war leader, Volodymyr Zelenskiy, posed as an anti-oligarch in order to be elected president in 2019. But his campaign was launched on the TV channel of billionaire Igor Kolomoyskyi. And his putative hostility to oligarchs hasn’t stopped him, together with the partners in his TV company, owning a network of offshore companies registered in the British Virgin Islands, Cyprus and Belize. Repressing the Left and gutting labour rights, which Zelenskiy has done in the middle of a war, is strangely in tune with the interests of the mega rich.

Controlling the state, and using it to amass and protect great wealth, has become almost customary in the 21^st century. Ba’athism emerged in the 1940s and 50s as a pan-Arab, quasi-socialist ideology, though one which was brutally repressive of leftists. But under Assad in Syria, Ba’athism has simply become the means through which a small elite have enriched themselves through privatisation and neoliberal ‘reforms’ – a process which has notably intensified since the turn of the millennium. In China, the official communist ideology and an interventionist state has proved no impediment to the leadership and company managers accruing huge fortunes. The Panama Papers, for example, named the families of eight current or former members of China’s politburo. Levels of inequality are similar to those of South Africa, peasants are regularly stripped of their land and turned into proletarians and super exploitation of workers occurs.

The liberal heartlands of America and Britain – despite their ostensibly democratic institutions – exhibit the identical thumbprints of billionaire domination, manifested in the gravy train of privatisation, quantitative easing, political funding and control of the media. Oligarchs in Britain, George Monbiot said in 2020, “use their economic power and translate it into political power, which is what oligarchs do the world over”. And given that billionaires (oligarchs) have hugely increased in number in the first two decades of this century, the process will only get more explicit.

It may be objected, plausibly, that the interests of billionaires lie in a strong state that protects them and ensures the conditions for their continued accumulation of capital, but that they definitely don’t lie in the division of the world into warring blocs that impose sanctions on each other and confiscate wealth. This is undoubtedly true. But it was also the case that the so-called liberal ‘golden age’ of capitalism (1870-1913) degenerated into the internecine carnage of World War One despite it being in no-one’s interest that it do so. The pre-WW1 era and our own are remarkably similar in many ways. The resemblances include a commitment to a globalised economy, few cross border restrictions on the movement of goods, capital and people, and a belief in balanced government budgets. But the liberal age of capitalism can to an abrupt and brutal end in 1914. Ours can too.

Those old enough to remember the 1990s will recall the air of triumphalism around the collapse of Communism and the fervent belief that, now the world was entering an era of globalisation, free trade and liberal capitalism, countries would regard war as irrational and anachronistic. No two countries with a McDonalds’ franchise have ever gone to war with each other, it was said. Well Russia has – or had – McDonalds.

The question which now inserts itself is whether nationalism, racism, authoritarianism and war are the inevitable shadows of liberal capitalism and market fundamentalism. That despite many in the global elite not wanting a world of war and division, the world is inevitably predisposed to such a disaster because of the inequality and suppressed conflict inherent in a  global economy designed exclusively around the needs of the rich.

If you ignore the noise about Hitler and appeasement, you can hear those chimes of history ringing now.

 

 

 

 

 

 

 

 

 

 

The Economy the Rich Won

The two-part BBC documentary, The Decade the Rich Won, which concluded last week, made for interesting viewing. It told “the little understood story of our times” – how through the policy of Quantitative Easing (QE), the fabulously wealthy became even more fabulously wealthy and the rest of us had to make do with austerity and falling wages. But it did beg certain questions:

Why didn’t anyone say so at the time? “Full disclosure” said hedge fund manager Paul Marshall. Since the 2008 crash the world’s largest central banks (US Federal Reserve, Bank of England, European Central Bank and Bank of Japan) have created around $20 trillion which has basically gone into the already cavernous pockets of banks and wealthy individuals (like Paul Marshall’s).

In the words of Andrew Huszar, who was QE Program Manager at the Federal Reserve (and thus in charge of the entire process): “over the last 12 years, we’re talking about unprecedented amounts of money being printed and funnelled into the markets, banks being showered with trillions upon trillions upon trillions of dollars, ultimately benefiting the most privileged in our societies.” Only a fraction of the ‘stimulus’ he admits, “was actually getting out and making a difference in the lives of everyday people”.

But these mea culpas are strictly retroactive. When QE was first happening, not only politicians and central bankers – who you might expect to parrot the official line – but also media organisations like the BBC uncritically rehearsed the story that QE was providing  a lifeline to the ‘real economy’.  In 2009, the BBC likened QE to putting “imaginary petrol” in your car. 

And this isn’t of purely historical interest. The Covid shut down saw governments quickly turn to the “unconventional” (now used so much it must be thoroughly conventional) technique of QE. In Britain, the Bank of England increased QE from £495 billion to £895 billion. And the BBC was on hand to explain how this pumping of money into the economy would “help it to recover”.

So much like a war, when the controversy in question has to be implemented unscathed, critical voices are sidelined. But in the aftermath, when it doesn’t much matter anymore, they are allowed airtime and what actually went on can be safely revealed. That’s how much freedom we’re allowed.

If the economy wasn’t saved, what was? All the old familiar faces protested that they had no choice but to implement QE. It was a no brainer. “We kept the economy going,” said Alastair Darling (Chancellor in 2008). “People who’d otherwise have lost their jobs didn’t”. Former Bank of England Governor Mervyn King attested that the first tranche of QE prevented a re-run of the Great Depression. Transient Tory PM Theresa May called QE “emergency medicine”.

But if only a small amount of the QE trillions actually escaped into the ‘real economy’ – in the US mortgage lending actually went down after QE was introduced – it can’t have been the actual economy, the economy of people exchanging goods and services, that was saved. The “emergency medicine” has to have been for the conduit through which QE was implemented, the financial system. And only by QE preventing the implosion of the financial system, was the real economy rescued from oblivion.

The real question is therefore how did QE save the financial system? This is something the documentary didn’t try to explain but is actually the crux of the whole story. One means was simply by pumping huge amounts of money into the system. Thus hugely indebted banks and other companies escaped their natural free market fate.

But QE did more than supplying, in Huszar’s words, “the greatest Wall Street bailout of all time”. It also works by ensuring an ultra-low interest rate and by increasing the price and reducing the yield on government bonds, incentivising investors to shift into other assets, such as shares.

In this way, zombie companies – firms that do nothing more than survive by meeting the interest payments on their debt and paying wages – are permitted to live on. And the stock market as a whole receives a purely artificial boost. Under ‘normal’ market conditions, shares prices reflect investors’ expectations that profits will be high or low in the future. But not under QE. Thus a company such as car rental firm Hertz can file for bankruptcy and see its share price soar at the same time.

This is nothing like a free market system. More accurately it should be called a state capitalist system.

You can’t artificially hold down energy prices but you can, apparently, artificially raise share prices. Ex-banker and hedge fund manager Rishi Sunak lectured us last week on the futility of the state trying to hold down the natural, market prices of gas and electricity. But strangely this King Canute style impotence does not apply to share prices – or house prices – which through QE can be synthetically raised for years.

But what happens, you might wonder, when this outside ‘stimulus’ is taken away? When “the shot of adrenalin”– in Alastair Darling’s phrase – has done its work and we can get back to normal.  Will there be a massive market correction towards ‘natural’ share prices, precipitating widespread company bankruptcies? In 2018, US Federal Reserve started selling the bonds it had acquired under QE – a practice called Quantitative Tightening – but it had to abandon the policy after a few months owing to a negative reaction from markets.

In Britain, authorities have reached for the “unconventional” policy of QE on three separate occasions in the last decade. Currently central banks around the world are reducing the amount of QE but not stopping it altogether or reversing it which should happen under a free market system.

The documentary only nibbled at this question. “In a way markets are addicted”, said hedge funder Marshall, “and central banks have become very nervous indeed about removing the drug.”

But if QE has become a near permanent part of the economic landscape what are the consequences? Does its very existence – and the huge amount of money involved – mean that it is always accompanied by the shadow of austerity?

Or can QE be redirected to pay for essential public services like the NHS? If you can save the financial system by injecting huge amounts of money why can’t you do the same for public services millions of people depend on? This is essentially the argument of Modern Monetary Theory – that public services can be fully funded through nothing more elaborate than hitting keys on a computer. The need to amass taxpayer funds to pay for everything is a myth. Austerity is a political choice, not an economic necessity. The only constraint – MMTers argue – is inflation.

However, lack of inflation is the one sure sign that QE didn’t diffuse through the real economy, rather staying within the financial system. The classic explanation of inflation is that it is caused by too much money chasing too few goods. And the simple fact that inflation didn’t rise exponentially is a pretty strong indication that the QE trillions didn’t filter through the financial system. Inflation is rising now unquestionably, probably caused by supply chain disruptions and Covid relief spending. The Bank of England predicts it will hit 7.25% in the spring. But this is not the level of inflation that QE, if the theory is right, should generate.

However, if QE is redirected to pay for public services, all the ingredients for spiralling inflation are there. This is because the money in its entirety will enter the real economy – through spending by consumers and suppliers. And the mere existence of more money, if accompanied by rising prices, does not translate into greater value or purchasing power.

It’s also the case that QE, notwithstanding the public pronouncements, is intended to have financial effects. Through buying bonds from banks and other companies, these institutions are suddenly awash with cash which they will inevitably use to buy assets, such as shares, thus inflating their price. It is also meant to reduce interest rates on debt for vastly overleveraged companies. QE “for the people” cannot, I would suggest, use the same conduits without having similar effects which pointedly don’t benefit the people.

But the establishment’s faith in QE is unshaken. The BBC doc did reveal a certain buyer’s remorse on the part of some. Ex-Bank of England governor Mervyn King admitted, “if you’ve had the biggest monetary policy stimulus the world has ever seen and you still haven’t had adequate economic growth, maybe the answer is not yet more monetary policy stimulus.”

But there no indication that those at the helm would, in retrospect, have done anything different or, indeed, would do anything different today. Even in conditions resembling 1970s’ “stagflation” – negligible economic growth and rising inflation – alternative means of stimulus are not seriously entertained. “Helicopter Money”, for example, the crediting of ordinary people’s bank accounts with cash in the expectation they will spend it, contravenes a core principle of our political settlement, that only the financial system deserves bailing out and everyone else – especially the bottom 30% — must be kept on a firm leash.

The QE/Austerity duopoly thus reigns supreme and is, if anything, more entrenched than ever given that it is longer a leap in the dark but tried and tested policy. The Chancellor of the Exchequer, for example, hails from the finance system and has faithfully imbued its self-interested mores. The personally very wealthy Rishi Sunak used to work for Goldman Sachs and a hedge fund – the precise ‘sector’ of the economy that Paul Marshall says has “made out like bandits” because of QE.

And if that isn’t guarantee enough, Sunak’s opposite number – Shadow Chancellor Rachel Reeves – used to work for the Bank of England and is an expert – mercifully! – on QE.

So despite the enormous pile of evidence that QE just makes the rich richer and has no impact on economic growth, the establishment faith in the practice remains undimmed. The bandits have taken over the asylum.

QE’s impact on inequality is astonishing. A statistic flashed on the screen at the end of the documentary revealed just how well the bandits have done. UK billionaires (individuals who own assets of more than a thousand million pounds) are worth 310% more than in 2010. But the effect is not limited to this blessed island. According to rich peoples’ magazine Forbes, in 2021 there were 2,755 billionaires in the world, an increase of 660 from just a year earlier. “Altogether these billionaires are worth $13.1 trillion, up from $8 trillion in 2020,” says Forbes. In 2006 – just two years before the QE era began in Euro-America – there were less than 1,000 billionaires globally with a collective net worth of under $3 trillion. What explains the huge increase in a period of insipid economic growth?

Objecting to this is not just a case of the “politics of envy” as it used to be derided. Beside the fact that these individuals do not deserve their loot under any objective free market criteria, such mammoth inequality fundamentally distorts society. As I have argued in a previous post, these billions are not all spent on buying luxury yachts or even blasting into space. They are also used as capital – money invested to make more money. In areas such as housing, privatisation, fossil fuel extraction, the media and democracy the invested funds of the ultra-rich are perverting society in ways that are directly at odds with the interests and desires of the vast majority. And through QE we have, through government action, turbocharged this process.

But then that is not all that surprising as the ultra-rich basically own the government as well.

Overthrowing the system with Tories

 That archetypal “good Tory”, Rory Stewart, was brandishing his emotional intelligence again last week. In the Financial Times, he unveiled the bombshell that Boris Johnson is “a terrible prime minister and a worse human being”. But, he stressed, Alexander Boris de Pfeffel Johnson’s awfulness is no aberration. He is the “product of a system that will continue to produce terrible politicians long after he is gone”.

Before we start celebrating any epiphanies, note the absurd narrowness of Stewart’s definition of ‘the system’. In the liberal Tory imagination he personifies the system comprises the first past the post electoral system, unserious and partisan politicians, a lack of critical thinking and an obsession with winning elections. Naturally Europe is presented as the alternative. “Germany had Angela Merkel” says Stewart. That’s the same Angela Merkel who inflicted a regime of economic sadism on Greece and allied with the antisemite Viktor Orban in the European Parliament, using his party’s votes to help elect failed politician and Merkel protégée, Ursula von der Leyen, as European Commission President. Lucky old Germany.

We must also brush over the fact that the policies Stewart advocates – and has implemented as minister under Cameron and May – are cruel, irrelevant or weird. He opposes “cuts to the army” little more than a year after Johnson announced a £16 billion increase in defence spending. And he repeats Tony Blair’s lament that there are no “new ideas” in British politics. And they say satire is dead.

It’s strange but I seem to remember some new ideas – and critical thinking – emanating from the official opposition from 2015 to 2019. I’ve also got this odd sense that a Labour leader from that period displayed some actual empathy in contrast to Johnson whose only capacity for empathy is for himself.

But the real problem with Stewart is total obviousness to the fact that a couple of years ago the entire system – finance and business, politics, the media, the armed forces, religious leaders, the higher civil service and so on – chose Johnson, either explicitly or effectively, and united to obliterate the anti-Johnson, Jeremy Corbyn.

Rather than spending a week or so going over the whole tragic saga, let’s just concentrate on the role played by the fearless fourth estate, the media. Lest we forget, Johnson was elevated to the status bumbling, self-deprecating, national chum by regular appearances on the BBC’s Have I Got News for You. A journalist himself, after resigning as Foreign Secretary he returned to the Daily Telegraph on a stipend of around £23,000 a month. During the 2019 election campaign, when they weren’t eviscerating the Labour leader as mortal threat to the nation’s soul and security, the media were urging voters to give Johnson a chance even though they – of all people – knew what he was really like.

Conservative but independent-minded journalist Peter Oborne says he was told by senior BBC executives that they didn’t want to expose Boris Johnson’s lies because, to do so, would undermine trust in politics.

But it’s in the current furore over Johnson’s lockdown partying that the role of the media is really laid bare. For obviously these parties did not happen last week. They occurred more than a year ago but remained a secret to the public – who are suitably outraged – until now. Why? Dominic Cummings alleges that “lobby hacks” didn’t say anything because they were at some of the parties. Whether that’s true or not, we do know that one party was a leaving do for the future deputy editor of the Sun.

It beggars belief that the higher echelons of the media were in the dark until leaks about – up to now – 17 parties.

 

In the words of writer Dan Hind, “The antics in Downing Street have been transformed into matters of political consequence deliberately and with considerable skill, skill that could have been used against Johnson at any time. This is not ‘news’, this is a redistribution of knowledge, from the tight circuits of elite complicity into the wider world.”

It is sobering to realise just how much of our ‘national conversation’ consists of matters the elite chooses to talk about and deem important.  Johnson’s soaring popularity, underpinned by the support of most of the press, survived revelations over corrupt PPE contracts, damning official reports into thousands of avoidable pandemic deaths and a proven recourse to lying when under pressure. None of it had any discernible effect until last autumn when a section of the press mysteriously found the lucrative lobbying jobs taken by MPs a step too far and started talking about it incessantly. It’s revealing, by the way, that Stewart’s indictment of ‘the system’ does not include the fact that nearly half of Britain’s top 50 corporations have “connections” with a sitting MP.

Now in the aftermath of the ‘bring your own booze’ scandal, Boris’s approval ratings have sunk to Jeremy Corbyn levels. That’s power.

For nearly four years, the opposition was scrutinised to within an inch of its life. But now a member of the Trilateral Commission is in charge that scrutiny has simply vanished. Sir Keir can purge Labour party membership of left-wingers, exile his predecessor for telling the truth, impose ‘normal’ candidates on local parties, and replace a social democratic policy programme he promised to uphold with a blanket reassurance that he won’t do anything to even mildly inconvenience the elite – all without fear that virtually anyone in the mainstream media will deign to pay attention. And if they do, they’ll approve anyway.

“We pretend”, says Stewart, “that the politician can wear a deceitful mask before the voters and then take it off in the cabinet room”.

You pretend. We stopped engaging in this farce ages ago.

 

 

 

 

 

 

 

 

The Trouble with Wealth

Living in a World with too much capital

Inequality is usually pictured as the obscene contrast between grinding poverty and unmerited opulence, between mile-long queues at food banks and corporate CEOs buying gold wrapped steaks with their £5 million annual salaries. Hunger in the midst of unbelievable plenty.

Or, in economic terms, through the irrationality of a system that blocks the flow of money to the mass of people, thus creating a demand problem as the poor – or not wealthy – are far more likely to spend their income than the rich.

There is nothing wrong with viewing inequality in these ways but in my opinion they leave something important out. What they overlook is that great wealth is a problem in itself, not just in relation to poverty. This is because wealth is invariably transmuted into capital – money invested in order to make money which is then reinvested again in a never-ending process. And capital which is not directed to a palpable collective need, inevitably distorts society and makes solving urgent problems such as climate change all but impossible.

A Tale of Two Factors

Economists often refer to capital and labour as “factors” in production, i.e. inputs that enable goods or services to be produced and turn a profit. As shown by heterodox economist Harry Shutt, western economies hit a benign equilibrium during the post-war boom (1950-73) in that there was strong demand for both factors – capital and labour. The result was extremely low unemployment (around 3% in Britain) and buoyant growth in fixed investment (capital investment in physical assets such as factories, buildings, equipment, vehicles etc.) that actually exceeded GDP growth.

However, after stagnation set in the mid-70s, the rate of fixed investment fell below GDP and unemployment began to rise. The decline in fixed investment has continued over the ensuing decades, dropping from 20% of GDP in France, Germany, Britain, Japan and the US in 1980 to 14% in 2015. Unemployment spiked in the 1980s and ‘90s. Its subsequent official decline has much to do with compelling individuals to take any available work – Germany introduced ‘mini-jobs’, for example, and on-demand labour and self-employment have mushroomed everywhere. In Britain, if you work for one hour a week, you’re counted as employed. And in order to “make work pay” it is subsidised by the state in the form of tax credits.

In essence, intensified by technological advancement, the demand for both factors of production – capital and labour – waned significantly. However, the way they were treated could not have been more different. Labour, if organised, was denigrated as a pariah and a self-interested impediment to the production of goods and wealth. Unions were ensnared by legal restrictions and the unemployed compelled to retrain and make themselves attractive to employers.

Capital, by contrast, – despite facing, in Shutt’s words, “a demand-supply imbalance comparable to that of labour” – was fêted as the essential ingredient of wealth creation. Entrepreneurs were lauded, profitability seen as a desideratum that benefited all, and the rate of return demanded on capital was intensified. In addition, the “wall of money” at the top of society was augmented by an influx of pension funds into financial markets which naturally demanded a healthy return in order to pay their beneficiaries.

The result has been an immense surplus of capital which cannot be sated by purely physical innovation but is nonetheless perpetually in search of profitable opportunities. This state of affairs distorts society in multiple ways. One way has been a turn to debt-based speculation entirely unrelated to material assets. This path caused the 2008 financial crisis. But there are many other examples.

Gimme Shelter

The environment is one. Oil companies have responded to looming climate catastrophe by transforming their rhetoric but little else. They proclaim a commitment to a ‘green transition’ but still try to “optimise” their oil and gas portfolios and prioritise new exploration. Investment in renewable energy is so low it doesn’t warrant a distinct category in their accounts. Many institutional investors, such as pension funds, charities, and universities, under pressure from climate activists, are committed to divesting from such companies and investing in renewables. However, hedge funds – pooled investment funds patronised by extremely rich individuals that aim to beat average market returns – have stepped into the breach. They are buying large stakes in oil companies, pushing up their share price. “People don’t understand how much money you can make in things that people hate,” commented one manager.

Thus the surplus of capital is ensuring that any progress made on climate change is, under this economic system, instantly reversed.

The financialisation of housing is another way capital is perverting a basic social need. In countless cities around the world, rents have shot up after investors – invariably an unholy combination of hedge funds, private equity funds, and Real Estate Investment Funds (REITS) – have bought up whole blocks of rental properties, viewing them as lucrative income streams. Alternatively, housing is demolished to make way for luxury apartments. Berlin presents an extreme case. €42 billion was spent on large-scale real estate investment between 2007 and 2020.  According to one analyst, after the 2008 financial crisis, investors were looking for a place to put their money and set their sights on Berlin. In a city where 85% of the residents are renters, rents have increased by 70% in nine years. Despite the existence of a strong cooperative sector and state-owned housing companies, over four in 10 rental properties in the German capital are owned by either financial market investors or big, private landlords.

Unsurprisingly, given the city’s culture, there is resistance. In September, a referendum in favour of expropriating Berlin’s largest corporate landlords, who collectively own 11% of apartments in the city, was passed. Whether the result will be carried through, however, remains doubtful.

One way of looking at the frenzy for privatisation which has taken hold throughout the world since the 1980s is not just in terms of corporate capture or ideological monomania, but as an outlet for an ever-growing mass of surplus capital. Privatisation is a longing that can never be quenched. In the first stage of privatisation state-owned industries were hived off to the market in one-off sales. But that was just the appetizer. Now private capital is guaranteed an income stream by running, on a contract basis, public services funded by taxation. In Britain, railways and buses, even spy planes, are operated in this fashion, while the state-funded National Health Service is gradually being hollowed out by private provision. In 2010, the NHS spent £4.1 billion on private sector contracts. Nine years later, this figure had more than doubled.

‘Exiled’ former Labour party leader Jeremy Corbyn posed a genuine threat to these vested interests – through for example a pledge to “renationalise” the NHS. He jeopardised an extremely fruitful, and necessary, income stream and thus had to be destroyed.

Globally, a kindred process has occurred. Where public services have not been gutted, the state serves as a convenient shield behind which public funds are directed into private hands. Under the guise of attaining universal health coverage, the Kenyan government has subsidised access to private care, given private providers higher reimbursement rates and formed public-private partnerships with international companies at great expense. All this has been done at the behest of international agencies such as the World Bank and billionaire charities like the Bill and Melinda Gates Foundation.

“More and more people have been priced out of health care because of their socioeconomic situation and inability to access private care either because of the expenses involved or because the type of help they are looking for is not available, because it's not profitable”, says an author of a report on the subject.

There are numerous other instances of the pernicious effects of surplus capital scouring the globe to meet its unquenchable appetites. A partial list must include the warping of democracy and the media, the money laundering role of football, and the targeting of children by consumer giants. The problem of inequality – and thus contemporary capitalism – is apparent not just in too little money at the bottom of society, but too much at the top.

Check Your Privilege

But curiously one could argue this is contrary to the original purpose of capitalism. Defenders of the system are fond of pointing out its modernizing character in contrast to atavistic socialism. However, the myriad anti-social effects of surplus capital serve to illustrate how we in the 21^st century are living according to the dictates of a 19^th century system. Modern capitalism and its attendant institutions were born at the height of the Victorian age. Stock markets and joint-stock companies (later known as corporations) were created to facilitate outside investment – capital – in economic enterprises and limited liability laws introduced to protect investors by ensuring that if their chosen enterprise failed, they would lose nothing more than the original sum they ventured. Shutt calls “the privilege of limited liability”– which still exists – “the bedrock of capitalism”.

In the description of Canadian law professor Joel Bakan, “the modern corporation was invented in the mid-nineteenth century to help create pools in investment capital needed to finance new and growing industrial ventures, like railways, steamship lines, and factories.” Corporate law, he says, was “designed to incentivize and thereby produce the fuel, capital, that the system needs to operate.” Without it, “the whole system, not just the corporation but capitalism itself, would grind to a halt.”

Arguably, at the time, incentivizing the “fuel” did produce immense dynamism and social benefit in the form of railways, steamship lines etc. Even Karl Marx was impressed, paying tribute to the “colossal productive forces” unleashed by the bourgeoisie. But now this “fuel” is primarily engaged in a compulsive and blind search for profit, no matter whether this adds to social welfare, or more likely, degrades it. To stretch Bakan’s metaphor, the van is now full but the pump is still spewing out more petrol which is spilling all over the station forecourt and running down the street.

The capital imperative is now not merely anachronistic and anti-social but positively deadly. We now know that order to stand some chance of staying within the limit of no more than 1.5 degrees of global warming by 2050 – and thus potentially dodging catastrophic climate tipping points – the vast majority of fossil fuel reserves must remain in the ground. However, such a philosophy of abstention is utterly alien to the nature of capital which is myopically impelled to exploit short-term profit. And in a world of boundless surplus capital – with each fragment on an eternal search for profitable opportunities – such an endeavour is doomed from the start.

In 2014, geographer David Harvey estimated that capital had to find profitable opportunities worth $2 trillion in order to satisfy the requisite ‘return on investment’. By 2030, he gauges, that need will have increased to around $3 trillion. “Thereafter the numbers become astronomical,” he writes. “Imagined physically, the enormous expansions in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have to be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained.”

And we also have to imagine what non-physical – i.e. speculative – investment will do to the world in the coming years.

Bending the Knee

But, perversely, rather than face up to this literally unsustainable situation, the world’s governments have chosen to artificially turbo-charge capital creation. Through the central bank policy of Quantitative Easing, the quantity of money in the financial system has been massively expanded – by an estimated $13.9 million a minute since 2020. As a result, developed economies have largely weathered the Covid outbreak but at the cost of hugely increased inequality. The combined wealth of US billionaires has risen by 70% since the start of the pandemic, a period of a little more than 18 months. In Britain, the number of billionaires has jumped by a quarter while globally billionaire fortunes have increased by 27% in the context of an expected rise in extreme poverty for the first time this century. For reference a billion is a thousand million.

But those are merely the personal effects. QE has also instituted fake stock market booms, facilitated the lucrative practice of companies taking over their rivals (to no-one’s benefit bar senior executives and bankers), produced skyrocketing property prices in the UK, and swelled the resolutely short-termist venture capital industry. In short, rather than – heaven forbid – standing up to the immensely powerful vested interests around capital enrichment, governments have chosen to bend the knee and grant their every wish. Contrast this with the way defenceless benefit claimants are treated and you have an insight into the mentality of most politicians.

There is a current in left-wing thought that is indifferent to wealth inequality, viewing it as far less pernicious than income inequality despite the fact that it is more extreme. Before the pandemic, wealth inequality was rising in 49 countries. Its enormous increase in the brief time since Covid struck has prompted calls for a tax on wealth. But if wealth inequality has spiralled in such a short period, what will happen in the years to come when many of its causes will likely remain untouched? A wealth tax will be a mere drop in the ocean.

Great wealth is profoundly undemocratic, concentrating economic decision-making in fewer and fewer hands. But it also ensures that capital enrichment, a process which profoundly hurts and perverts society, is set in stone and will intensify year by year. The time is coming when we will find what it does intolerable.