‘Remember you heard it here first,” I told an audience at a lecture at the University of Cape Town Summer School last year, referring to the coming destruction of pensions. I recalled these words when gloomily contemplating the halving of my own pension in the past month. Will July 2002 be seen with hindsight as the beginning of the end of unregulated capitalism?
Unregulated capitalism is unravelling from within its heartland, the United States. That is where investment bankers prevail. Their interest in share value as opposed to real value blinded them to the inevitable collapse of stock markets that bore little relation to their asset base. And that is where panic selling is potentially destructive because all our stock markets have been forced into their ambit. Africa and Latin America have already been seared to the core by the unfettered markets. Now it may be the turn of the rich.
There is nothing wrong with the free market as a way of getting goods and services produced and distributed. Indeed it is the only way to do so that works. But the free market must be regulated. Without rules the most ruthless prevail. Without rules George Orwell’s 1984 becomes inevitable. That is why we do what suits the US economy: because it is the strongest. And American politicians do what their largest election paymasters — the large corporations — want.
The immediate cause of the current collapse is that unregulated capitalism has created massive corruption within large corporations not just in the US but worldwide. They have successfully argued that regulation creates nasty inefficient bureaucracies that put the brakes on enterprise. And they have had the active collusion of the Big Five accounting firms — Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG and PriceWaterhouseCoopers.
These firms, trading on their professional status, have not only misled the public, but also helped create the culture that pays millions to executives and throws thousands into penury.
These firms audit the FTSE 100 top companies in Britain; they generate $65-billion in revenue and employ more than half a million people. The consultancy business brings in four times its auditing fees, so why should it upset a lucrative applecart? They exchange staff with their clients — even ”seconding” staff to the British Treasury — and see no contradiction in taking fees from competing clients.
These five firms have enormous political influence. Perhaps that is why we have heard so little of their activities. Their contribution to political parties in the US runs into millions. The British government spent £133,5-million on their services in 2000. And its Inland Revenue gives their clients, the large corporations, special blind-eye treatment over tax assessment.
The signs of collapse have been there; but they have been drowned by the frantic talking up of the American markets — upon which, due to the deliberate globalisation of all markets, we are all largely dependent. I say deliberate to contradict the assiduously cultivated falsehood that market globalisation is inevitable.
Much human activity is benignly globalised — information, scholarship, research, cross-cultural hospitality, travel and even some large-scale and niche productions, such as minerals, shipbuilding, arts and crafts. But we do not need the skies criss-crossed with cargoes of butter and apples and identical clothing and tackies. We do not need to buy out of season fruit that has been picked unripe a year before we eat it, or chicken breasts that have been flown elsewhere to be injected with beef protein so that they will absorb water to give them weight.
This globalisation of mass-produced trade is not only bad for our health and taste buds, not only the source of unnecessary aircraft pollution, it is also destructive of agriculture and industry in less capitalised countries. The requirement to compete internationally is good only for countries and people who are already ahead in the race.
Once we understand that we have been sold a pup in the injunction to fling our economy into the global piranha pool we will start focusing on growing our own markets and our own capital.
Margaret Legum is with the South African New Ecomomics Foundation in Cape Town