Review of Who Runs Britain? How the Super Rich are Changing our Lives by Robert Peston (Hodder and Stoughton)
“No nation”, Frederick Engels once wrote, “will put up with production conducted by trusts [i.e. big, industry-dominating cartels], with so barefaced an exploitation of the community by a small band of dividend-mongers...
“The exploitation is so palpable that it must break down...”
Engels was too optimistic. Robert Peston is the BBC’s Business Editor; a former journalist on the right-wing Sunday Telegraph; a man who avows that “much of what Margaret Thatcher did was necessary”, and whose most bitter complaint against the Blair-Brown government is that it has not privatised the Post Office.
But his new book shows that the hyper-financial capitalism of today is more and more, indeed, a “barefaced exploitation of the community by a small band of dividend-mongers”.
Despite the ballooning of giant multinational corporations, capitalist competition has not faded away as Engels thought it might. In fact, paradoxically, oligopoly and competition have risen together: global markets dominated by a few huge suppliers have sharper competition than a patchwork of local markets with many local capitalists.
But the state is heavily involved, handing out contracts, providing infrastructure, facilitating, bailing out those in trouble. And at the top of the heap, the “dividend-mongers” run riot.
Bosses’ incomes, generally, have increased more than workers’ wages. In 1989 the average pay for senior directors running the top 10% of British companies was 19 times median workers’ pay. In 2006, the median total earnings for chief executives of the top 100 companies were 75 times median pay.
But, Peston points out, the people who run capitalist corporations producing goods and services are actually “pretty low down the hierarchy”.
Within those corporations, the average rates for production managers are £27,000 to £63,000 a year. Sales managers get £38,000 to £100,000 a year. Corporate treasurers are on £55,000 to £100,000.
You get into the real big money when you get some distance from production proper. Investment analysts’ rates are £110,000 to £130,000 a year, plus bonuses of about 50% to 100%.
According to Peston, “there are hundreds of people in London working in hedge funds and private equity” that make tens of millions every year. In large part due to tax changes made by New Labour, these super-rich can arrange things so that they pay very little tax. “In 2006... 54 UK-based billionaires were paying income tax of just £14.7 million on a combined fortune of £126 billion, and only a tiny number paid any capital gains tax at all”.
A chapter deals with “private equity”, the tactic whereby an individual or firm borrows billions to buy a whole company, all the shares, then chops and pummels the company so that it can sell the shares again at a higher price a few years later.
For example, KKR borrowed £9 billion and put in £2 billion of its own to buy Boots in 2007. If it can sell Boots again for £13 billion in a few years’ time, then, after repaying the loan, it has turned its initial £2 billion into £4 billion in just a few years.
By the use of financial gambits, gains that would otherwise be more or less latent — subsisting in company assets, or shares, which are not sold — are cashed in. And the profiteers pay minimal tax.
“The really striking social phenomenon under New Labour”, writes Peston, “has been the triumph of the super-rich”. A chapter chronicles New Labour’s fund-raising and loan-raising from business, and Blair’s “naive faith in the ability of business and business people... coupled with contempt for much of the public sector”.
Of Brown he writes that: “The Prime Minister thinks it should be a cause of national joy that the UK is a gigantic tax haven for the internationally mobile business elite”.
It is Blair’s and Brown’s expropriation of what were the channels for working-class political self-expression which explains why people put up with “barefaced exploitation by a small band of dividend-mongers” — why that exploitation generates atomised anger and frustration rather than an effective political response.
It is up to us to change that, by rebuilding working-class political representation.