There appears to have been an awakening of late that our current version of capitalism is simply not working; in the words of ex-Telegraph editor Charles Moore, ‘We are bust – both actually and morally’ i. The financial crisis of the latter years of the last decade, the MP ‘expenses scandal’, and the phone hacking scandal have each discredited our economic and supposedly moral elite, whilst the widespread rioting of summer 2011 has led some to assert that the virtues of the 1980s – consumerism and ‘popular capitalism’ – have damaged moral fibreii. Admissions that the rich must take responsibility have not only come from journalists and commentators, in a startling comment piece in the New York Times on the 14th August, billionaire Warren Buffet argued forcefully that the mega rich should pay more tax – and do their bit to contribute more to society iii. This call was echoed from across the Atlantic when 16 French billionaires requested and pressured Sarkozy to impose an additional tax levy on the super-rich iv.
Yet, the attitudes of our government seem completely adversarial, with George Osborne showing dogmatic determination to remove the 50% tax bracket that was introduced by the previous Labour government. Admittedly the 50% bracket raises little additional revenue for the Treasury, yet it is important symbolically, and its removal will be seen as a slap in the face by the majority who are confronted with 20% VAT and squeezed living standards. Further, A close look at the recent deal aimed at taxing Swiss bank accounts between the UK Treasury and the Swiss government shows a roughly 20% -25% adjustment rate – far less than the prevailing 40% tax rate. This has been criticised heavily by tax campaigner Richard Murphy, who warns that ‘Britain’s top-rate tax payers can now quite legally bank in Zurich to pay less tax’v.
So, why should the rich take up more of the tax burden? In a western world of blooming budget deficits, savage public spending and austerity measures, the extra money created by levies would be valuable to treasuries. Richard Murphy estimates that the weak deal on Swiss bank accounts has cost the UK government £20billion, which would be very useful in saving public sector jobs. However of course, levies are just short term; the general system of taxation needs to be altered in order to provide long term benefit. Higher income tax, capital gains, and inheritance tax would allow regressive taxes such as VAT to be reduced, creating a more income equal society – the benefits of which are convincingly put forward by Wilkinson and Pickett in their work, ‘The Spirit Level’. International cooperation is needed to ensure the success of such a tax regime however; else capital flight would be likely. It appears fiscal harmonization may be on the cards in the Eurozone, yet it is likely this will follow the principles of the now widely discredited Neo-liberalism.
Of course, building a new capitalism is not all about tax and spend. A new capitalism needs to have an emphasis on corporate and social responsibility and ought to be acutely aware of the benefits of cooperation, as well as competition. Before the crash occurred, an important yet largely ignored school of thought began to emerge, named ‘Co-op capitalism’. As expressed by Noreena Hertz, Co-op capitalism:
“Has a renewed idea of business as a force for innovation and improving the world, but which needs to be reined in when the pursuit of profit conflicts with society’s interests and helped when the short term finances for innovation are not there”
The notion put forward by Hertz that business can be a force for good should not be ignored by the left; capitalism has brought us many benefits, and we in the Western World are now more healthy and prosperous than ever before. Yet, it is clear that unfettered capitalism has not been a complete success. Hertz is absolutely correct that fast food companies should take a role in curbing obesity, and big pharmaceutical companies should put innovation before profit. Aspiration in the UK has for too long been based solely on individual gain and profit; this must change in a new capitalism, focused on the gains of mutuality and the benefits brought by cooperating with one another.
So, where does all this all end? One of the buzzwords of the moment for David Cameron is ‘responsibility’, yet this has been largely directed at the poor. It is clear that this narrative must be broadened; responsibility needs to become a virtue of the rich and of the large corporations. Strong government intervention (state by state and multilaterally) is crucial, as it would be naïve to assume that an element of coercion will not be necessary. The rich must be made to take responsibility for their share of the tax burden; corporations must take responsibility for their social ills. Timing is critical here – we are at a time of uncertainty, austerity and widespread discontent. A choice desperately needs to be made; a new capitalist order to benefit society, or the continuation of a system that benefits the few; a system that has been described by one of its main proponents as ‘actually and morally bust’.
Sources and further reading:
i Moore, C., ‘I’m starting to think the left might actually be right’, The Telegraph, 22nd July 2011, http://www.telegraph.co.uk/news/politics/8655106/Im-starting-to-think-that-the-Left-might-actually-be-right.html. Accessed: 29th August 2011
ii Hawkes, A., ‘UK riots were a product of consumerism and will hit economy, says city broker’, The Guardian, 22nd August 2011. http://www.guardian.co.uk/business/2011/aug/22/uk-riots-economy-consumerism-values. Accessed: 29th August 2011
iii Buffett, W., ‘Stop Coddling the Super-Rich’, The New York Times, 14th August 2011. http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=1&hp. Accessed 29th August 2011.
iv Toynbee, P., ‘Where is Britain’s Warren Buffett or Liliane Bettencourt’, The Guardian, 26th August 2011. http://www.guardian.co.uk/commentisfree/2011/aug/26/buffett-bettencourt-tax-rich. Accessed: 29th August 2011.
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