“Fred Goodwin’s house in Edinburgh was attacked this morning. We are angry that rich people, like him, are paying themselves a huge amount of money and living in luxury, while ordinary people are made unemployed, destitute and homeless. Bank bosses should be jailed. This is just the beginning.”
And those were the chilling words from a group entitled “Bank Bosses are Criminals”. Do you see why we have taken a somewhat contrary position to the backlash against bankers? It is not that bankers didn’t mess up. It is not that they weren’t greedy. It is not that executive excess is a good thing. This column has argued in favour of upping the marginal rate of income tax to 50 per cent on annual income in excess of, say, £150,000.
But, when one sector of the population has abuse hurled at it from the media, politicians and so-called polite society, it is inevitable that things will spiral out of control. In any civilized country you do not criminalize activities that were considered legal at the time they were undertaken.
The road to persecuting bankers that we currently tread takes us to hell. The Nazi party in Germany was born at a similar crossroads.
Meanwhile, in the US, Barack Obama said: “The rest of us can’t afford to demonise every investor or entrepreneur who seeks to make a profit.”
And yet, it seems all of a sudden profit has become a bad thing again. Talk is of cooperation; of sharing the proceeds of our labour.
Read on, comrade, but the phase we could be about to enter was predicted, and it was predicted by an individual who believed in the virtues of capitalism, but who said it would ultimately collapse, nonetheless.
In 1989, Francis Fukuyama wrote an essay entitled The End of History. It was the year the Berlin Wall came down. The West’s victory over the Soviet Union and its system of communism seemed complete. It seemed as if capitalism had won the ultimate victory. The end of the conflict of ideology, meant the end of history. That was Fukuyama’s hypothesis. Later, theories emerged dismissing Islamic terrorism as simply the death knells of an older ideology, as it loses out to the irascible force of Anglo-Saxon capitalism.
It is different now, of course. Twenty years on, it seems rather than ending, history has, if anything, accelerated.
And now talk is of the death of capitalism.
Others say it is not capitalism that will die, merely unrestrained capitalism. But, then again, who decides what aspects of capitalism are unrestrained?
But the mood has changed. Profit is out, sharing is in. Individualism is out, cooperation is in. On TV yesterday, one journalist reacted to the idea that entrepreneurism is important. Rather dismissively she said, “Sure we need the Dysons,” but then Polly Toynbee talked about cooperation – as if entrepreneurs are like the David Beckhams of this world, important, but not really relevant to your average man and woman.
The economist Joseph Schumpeter, who once said he had three ambitions in life, to be the best horseman in Vienna, the best lover in Europe and the greatest economist in the world during the 20th century, talked about ‘great gales of creative destruction’.
He saw destruction as essential. The hero of his writings was the entrepreneur. He saw the economic cycle as inevitable, and recessions as important for driving economic evolution.
But, whereas Marx predicted the end of capitalism in bloody revolution, Schumpeter believed that capitalism would ultimately be replaced by rule by social democrats, or what is sometimes called corporatism.
That may not seem too horrendous – yours truly has voted SDP before – but Schumpeter’s argument was that the price of capitalism would create too much social tension, so that it would be replaced by a safe system that does not allow failure.
So, risk is out, risk assessment strategy is in.
But does this mean that if you do take a risk, and it fails, you may get your house vandalized?
And don’t you dare say it is just greedy bankers. In the media-induced hysteria that is developing there will be no differentiation between the risk of an entrepreneur, and the risk of a banker.
In the sorry world we may be set to enter, risk may die. So will innovation and change. And with that, we may well indeed see the end of history.
© Investment & Business News 2013