Welcome to Fantasy Island

Following my chat with David Cameron I feel emboldened to go further with my panacea for Life the Universe and Everything.

I hate to concede anything to the Left because I think it’s a failed philosophy. It has failed in its most extreme forms in the USSR, China, Cuba, and everywhere else communism has been attempted. But it has also failed in more moderate incarnations, notably in India where the release of free enterprise has turned a sclerotic failing state into another Asian tiger.

I will go further. All social enterprises reduce growth, impact living standards and waste money. That includes cherished institutions such as the NHS, public education and welfare. But sane people will accept a degree of social spending because it is the price we pay to live in a civilised society. The only question is: where do you draw the line? I believe the fundamental difference between Right and Left is, the Left believe government is a force for good, and we need more of it. The Right believe government is a necessary evil and we need as little as possible. Of course ‘more’ means higher government spending and higher taxation and ‘less’ means lower spending and less taxation.

I am pretty convinced people spend their own money a lot more effectively than the government will spend it for them.   

But, oh dear, I have to admit the Left are right to call the Banking Crisis a failure of Capitalism. However there is a key difference, Capitalism will recover. It always does. It is a fluid as water. It will automatically take the shape of any environment it finds itself in.

But, even as a rabid right winger, I find myself very uneasy about modern capitalism. I am a passionate believer in Free Enterprise and Free Enterprise and Capitalism are often used as synonyms. But I am starting to believe that Capitalism as practised now, is very damaging to Free Enterprise. Big Capitalism is the enemy. It always seems to result in monopolies, duopolies or triopolies (yes, I know there is no such word, but you know what I mean).  That destroys competition and without competition Enterprise is not Free. 

Governments are not unaware of this, but they seem to accept industry explanations that these massive corporations are in fierce competition - with each other. Now, there is actually a lot of truth in that. But the chance of an enterprising new business succeeding in these industries is close to zero.  But any government of the Right or Left must be pragmatic, and many of these massive companies are delivering what their customers want – which is how they got massive.

Once you step onto the Global stage, massive is too small a word for it. As we all now know, The Banks became so huge they could (and did) threaten the survival of the state itself.

Governments tried to use regulation as a substitute for the real market constraints of competition. They failed miserably. Partly because Banking is byzantinely complicated and they did not understand it and partly because the cleverest and most skilful people were in the banks making fortunes and not in government trying to wade through tiers of leaden bureaucracy to make a career. But mainly because governments are incompetent financial managers and they need the banking system to fund their profligate spending.

I heard an interview with a Greek Minister on the radio today. He was an intelligent and articulate man, especially considering he was speaking a foreign language (i.e.English).  He was explaining how wrong it was for the EU to be sending in financial mangers to oversee Greek spending ministries. He also explained how the Greek economy was in thrall to the hedge fund managers. He was understandably distressed that the Greek government and therefore the Greek people were not masters of their destiny, but at the bidding of foreign powers. The only thing he forgot to mention is the Greeks are entirely responsible for the situation. They were the ones who borrowed like a teenager with her first credit card. They were the ones who faked their accounts to gain entry to the Euro, which gave them the ability to borrow way beyond their ability to repay the debt – ever. They were very happy with the hedge funds and big banks then. But when the time came to pay the Piper . . .

Globalisation has enabled us in the First World to improve our standard of living without improving our productivity. We have bought cheap manufactured goods from poorer countries at very low prices. As a result our standard of living has improved but because productivity has stagnated, we have borrowed to pay for it.

So, how do we get back to Free Enterprise in a world of mega corporations and the Super Rich?

Well, I have a solution. We limit the size of a company by law. We make it illegal to own or operate a business with a turnover greater than (say) one billion dollars or making an operating profit of more than two hundred million dollars. Needless to say, this would need to be an international agreement otherwise companies would simply relocate to parts of the world were the law did not apply. But the whole world does not have to sign up. Just all those countries that represent serious wealth. It would also be illegal for subsidiaries of any company over the threshold to trade in signatory countries.

A lot of fairly obvious loopholes would have to be closed; no individual could own a group of companies that exceeded the limits. No person could have shareholdings in a group of companies that exceeded the limit (tricky to enforce). Proxy ownership and shareholding would be illegal. Breaches in the various laws and regulations would be punished very harshly. Other schemes and wheezes to avoid the law would no doubt be legion, and would need to severely suppressed and punished.

Companies at the limit, would no doubt stagnate with no growth possibilities, that’s OK it makes room for enterprising new comers.  Huge global entities would have to be broken up. All to the good. Some maverick countries would certainly use this as an opportunity to attract big business, but with no access to lucrative advanced markets those big businesses would probably soon become smaller anyway. And if small less advanced countries want the benefits of mega corporations trading in (and virtually owning) their territories – they are welcome to them. We have been there. It’s not nice.

I did title this piece Fantasy Island. None of this will ever happen. Trying to get international agreement on preventing some clearly potty people in Iran getting nuclear weapons has failed. And that is the most obvious, common sense, aim I can imagine. Similarly, we have failed to get serious agreement on global warming, Syria murdering its citizens, population control (a particular favourite of mine) and a dozen other good causes that, with goodwill could be fixed fairly easily.

Chances of a radical new proposal limiting the size of businesses?

Somewhat less than zero.