Sunday, June 26, 2011

Tough at the top

Compared to us mere mortals who are faced with the Consumer Price Index (CPI), an alternative index adjusted for the rich - the SALLI (Stonehage Affluent Luxury Living Index). It's based on a basket of 50 items such as central London rental costs for a family property, private education, a day’s grouse shooting and fine wine and cigars and so on. And a new one is out now, and shows that things are getting tough at the top. The poor dears are facing a mighty 6% rise in the 12 months to April 2011, compared with our measly 4.5%. How will they get by?

This, apparently, “reinforces findings that UHNW [ultra-high net worth - i.e., obscenely rich] inflation is much more volatile than CPI, tending to exceed standard inflation in good times and significantly fall short in times of downturn”. Rents on 'high-end' London property rose by 6.7%. But apparently this trend is driven by higher demand, which is to say, the fact that rich people are actually queuing up even more than usual to rent London property - not exactly a problem of impoverishment, then. Consumables for the rich jumped 18% - fine wines rocketed up 27.6%, but fortunately champagne limited itself to a mere manageable 8%. Culture/entertainment were up an average of 10.3%, including a rise in art prices by 10.5%. But again the problem was high auction prices, so it really only shows that the rich still have plenty of money. They also cover 'investments of passion' - a wonderful phrase, betrayed by the fact that it refers to things like luxury cars, not, for example, the cost of paying their accountants extra to work how much tax they really owe and then paying it - rose a mere 4.7%. Yacht hire is up 5.1% on a year back, and sports and recreation as a whole up by 5.4% overall.

I don't wish to seem ungrateful, but looking at some of the creatures that figure in the world's rich lists (especially the realistic lists that include the dictators - Mubarak was wealthier than Bill Gates - and other corrupt plunderers of their own people), what exactly have most of these people done to deserve this pampering? Conversely, is there really so little understanding of what it means to have an economic system that is ultimately geared to the interests of these groups - does anyone really believe in trickle-down economics any more?

Sunday, June 19, 2011

Big fleas have little fleas...

The FSA is currently sending out a letter (http://www.fsa.gov.uk/pubs/ceo/dear_ceo_wealth_management.pdf) to the CEOs of 'wealth management' firms - organisations whose sole function is to pander to individuals of 'high net worth' (i.e., the rich) and even 'ultra-high net worth' (i.e., the obscenely rich). The letter describes research that suggests that quite a few of these organisations are busily doing their clients a large collective disservice. In fact their review found that 14 out of 16 UK firms pose a substantial threat to their own customers. According to the FSA, two-thirds of the files they reviewed were “not consistent with one or more of the following: the firm’s house models; the client’s documented attitude to risk; and the client’s investment objectives”. As the firms investigated ranged from small independent advisers to global banks, plainly the problem is endemic to the industry. The FSA has concluded that many firms are either ignoring or not properly taking into account their clients' concerns, knowledge or wishes (The Independent, 15 June 2011).

In other words, they are either massively incompetent or pursuing their own agendas.

It is a familiar enough scenario:

Big fleas have little fleas,
Upon their backs to bite 'em,
And little fleas have lesser fleas,
and so, ad infinitum.
(The Siphonaptera, by Augustus De Morgan, 1872, after Jonathan Swift's On Poetry: a Rhapsody, 1733)

At the same time, it exposes yet another dimension of the general corruptness of the financial sector. The fact that this time it is the rich and super-rich who are being bitten also suggests that no one is safe - not even the individuals standing at the pinnacle of the system as a whole. And if even those in whose interests the system ultimately operate are not immune, that in turn suggests that it is the system itself that is the problem. In other words, it is not just that the system is plagued with fleas; the system itself spawns the fleas directly.

The financial sector occupies a doubly powerful position capitalism as a whole. Firstly, given that the point of capitalism is the maximisation of profit, the sector that specialises in the management of money is surely the functional axis of that system. Secondly, as the single greatest source of credit, it sets the terms and makes possible the opportunities for investments. Indeed, the financial sector is the ultimate arbiter of what an investment is, and what priority should be attached to any particular course of action.

And curiously enough the financial sector is also unique to capitalism in that, unlike any other part of the economy, it makes money without producing a good or service that is of any value to anyone.

At its most basic, you can't eat money. But money is the ultimate commodity - in fact the only commodity whose sole use value is to embody exchange value. It is the ultimate means (as Byron remarked, 'Ready money is Aladdin's lamp'), as it can command any product and, owing to the increasingly obsessive commercialisation of capitalist societies), it is rapidly elbowing out every other factor mediating social relationships. So a sector that specialises in creating money out of money cannot lose: it stands at the heart of the system, it controls both the one indispensible means and ultimate end of the system as a whole, and it is the irreducible goal and need of every other sector to feed it.

And, it turns out, it is corrupt.

But it must be understood that this is not a kind of corruption of which the system can be cleansed by the vigorous application of righteous indignation, and that's that. This corruption is built into the system in much more profound ways than that. As capitalism is driven by its own tumbling profitability to absorb larger and larger segments of civil society, living on capitalist terms becomes a greater and greater part of life as a whole. In that respect capitalist relationships increasingly become the very definition of normality. With that, not only does more and more power (direct or indirect) flow to its financial core but the central myth of capitalism - that pursuing self-interest is the Royal Road to the Common Good - comes increasingly to define how we all think about how to live our lives. Given a combination of increasing pressure on profits, an increasing illusion (among our bankers at least) of selfishness and greed as the supreme social virtues and more and more opportunity for a little 'financial engineering', we can only expect this tendency towards corruption to grow.

And who is going to stop them? Not our governments, that's for sure. The economy is by definition the source of the material means to all our ends, so politicians can hardly be immune to the same temptations as their business allies - business controls the economy, so they must be pandered to at all costs. As history makes very plain, governments quickly realise that they have to pursue business's agenda if they are to realise their own, so hospitals, schools and even armies start to be designed, planned and funded in ways that ensure that the businesses involved profit to the maximum possible extent. On the other hand, if business interest and party policy come into conflict, it is not long before the one starts to undermine and overwhelm the other, as the sordid picture of the Labour Party's ideological striptease during the 1990s illustrated only too repulsively.

But all this is looking at the problem as though it were a possibly interesting theoretical problem, but with little relevance to the rest of us. But as De Morgan's ditty adds:

And the great fleas, themselves, in turn
Have greater fleas to go on;
While these again have greater still,
And greater still, and so on.

And where does this all stop? Where is the great beast on which all these tiers and tiers of fleas are finally feeding? It is us. Our governments won't be able to avoid it. To have the tax base to fund their own schemes, business must be provided with every opportunity to profit from the public purse. In other words, we have to bribe them to get them to pay tax. Ironically enough, one of the main ways we do this is by letting them off their tax bills. Not very clever. The only limit to this process - and absolutely the main target of contemporary capitalist expansion - is society as a whole. The systems we have spent so long building - health, education, welfare - are increasingly being set up as the Next Big Thing for exploitation.

And it's not only a matter of Coke machines in our schools and privatising the health service (gruesome though such prospects may be). Our security and military services - police, army and all - will also be handed over as opportunities for profit. That is, following our recent adventures in militarism, absolutely the other main target of contemporary capitalist expansion. So apart from the privatisation of pubic services, right now I fully expect the next big thing in capitalism to be the security state. Oh dear oh dear.

Quote of the week

A fascinating insight into the world of serious money from one of its architects:

The wealth management business will not run out of business but will be impacted if it starts asking questions about whose money this is. (John Sfakianakis, chief economist at Banque Saudi Fransi, 'Quote of the Week' at www.WealthBriefing.com, on 17 June 2011)

Given the number of dictators, generals, 'entrepreneurs' and assorted hangers-on stashing away their country's money in truly staggering amounts, much of it going straight into the coffers of the 'wealth management business', how different is this from a fence protesting that, if he started asking whose property he was so discretely buying, he'd be out of business in no time?

Of course, as I have argued elsewhere. this is simply the obverse of a world in which powerful people and perfectly serious intellectuals fantasize that the ruthless pursuit of self-interest is for the greater good.

Thursday, June 09, 2011

Save the saddest dolphins

Some creepy hotel chain is trapping dolphins. As Avaaz put it:
The pod was swimming peacefully in Samoa when nets closed in from behind -- trapping 25 wild dolphins for a luxury resort's latest exhibit. They are now locked in tiny pens, starved of food -- but we can free them.

For wild dolphins captivity is torture, their powerful sonar bounces off the walls back at them -- as if they are trapped in an endless house of mirrors. Most die young from stress induced illness, but some even commit suicide. If the wealthy Resorts World Sentosa succeeds in keeping them captive then half the dolphins will die in the first 2 years -- and it will legitimise the widely banned practice of capturing dolphins in the wild. We can’t let that happen -- let's use our voices to set them free.
This is the equivalent of locking up small children to amuse the ghouls. Go to http://www.avaaz.org/en/saddest_dolphins and sign up to their petition, then pass it on.