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Capitalism 2.0

Published on November 17, 2016

capitalism

It seems that in the four years that I have been writing my blog the world has been getting stranger and stranger. I’m not referring to Hillary Clinton’s bid to be the first female president of the USA, but Glenda Jackson’s portrayal of King Lear on a set adorned with plastic chairs, whose manservant turns out to be Ian from The Archers. Oh, and the vote, announced on our 9/11 that the US had Trumped the UK in its decision to blow a rather large raspberry at the Establishment.

Despite my public school education and chartered accountancy qualification I don’t see myself as part of that Establishment. My aim, since experiencing true poverty in Lesotho in 1979, has been to seek to understand The System, to be listened to by it and to help it change for the better.

Some change can be the peaceful result of constructive debate and I have a couple of modest successes so far:

  • The WealthBeing calculator has helped people understand how much capital they need;
  • The Supper Club and Grant Thornton have just issued a review of tax which inter alia proposed an export tax credit, an idea that I floated 2½ years ago.

But these recent electoral raspberries indicate that I’m not the only resident of the Western world who believes we need rather more significant change. Those of you who are my contemporaries will recall the slogan which swept Margaret Thatcher to power – “Labour isn’t working”. I suggest that, 37 years later the fact is that “Capitalism isn’t working”. Like any slogan the truth is rather more opaque. But it contains a fundamental truth – that there are significant flaws in the current system. And we need to fix them, because my experience as an FD, entrepreneur and mentor tells me that if problems are ignored they only get bigger.

And there’s still a lot of ignoring going on. Those who say that Brexiteers are wrong because Britain is the 5th largest economy and it wouldn’t have become so without immigration, miss the point. The flaw is not the total wealth created, it’s about distribution. I think that the reason that people voted for Brexit/Trump is that the methods of re-distribution, on which an efficient free economy is based, are no longer fit for purpose; any more than the assumptions on which pollsters operate are. Whether it be QE, TTIP or a lack of competition in broadband, we are becoming suffocated by bad decisions and regulations, based on the premise that they give stability to the capital markets whose wealth trickles down to us. The “trickle down” theory was discredited in Third World development many years ago and is obsolete here.

The only way to keep capitalism working peacefully is to enlarge access to creation of capital and encourage innovation by removing barriers to free competition. Specifically I propose the following:

  • Infrastructure spending that improves productivity: ultra-fast broadband and at least one new runway are matters of urgency
  • A taxation system that levels the playing field between SMEs and the mobile multi-nationals. Withholding taxes on remittances from the UK would be a good start;
  • Fair employment. Taxation of employees and sub-contractors is significantly different even though in say the NHS people do the same job under different contracts and in transport (Uber, Deliveroo) it’s not clear which way they are actually working. I’m pleased that this is now being reviewed.
  • Where industries are in terminal decline, systems that enable its workers to re-train, to the same level of value adding that they were achieving before. I’m told that manufacturing is about to face a skills shortage and London always needs more workers than are available. Why not move away from academic to technical qualifications and include bursaries at technical colleges for older workers? A diploma in Drone pilotage is more useful than a degree in the History of Aviation.
  • Most importantly, if we are to get anything done we need leaders who understand their electorates. The boundary changes will be an opportunity for constituencies to choose people with real world experience, outside of the Westminster bubble; and a cap on electoral spending would reduce the influence of capital “1.0”.

There have always been battles between owners and their employees but there are now a lot of people pushing at the pillars underneath the ivory towers whom the incumbents can no longer ignore. Lear’s daughters, who now control their former ruler, throw him out into the storm. Does he, who is now mad, consider their ingratitude? No for “that way madness lies”. Let’s have a sanity check before the storm arrives?