A din of inequity

[Wednesday]

Looking out for their interests
If ever there is one “watch” website that is really needed but doesn’t exist it is CBIwatch…

The CBI, in case you’re not aware, is the UK’s big business lobbying organisation. As you would expect, the Confederation of British Industry spends its time agitating for more tax cuts and breaks, defending imperialism, and wining and dining politicians.

They have recently announced a review of the UK’s corporate tax system, but stress that it will not result in a call for more cuts; rather the report will be concerned with making the country more competitive.

Yeah, right. “Competitive” being code for “kinder to capital”; when was the last time the CBI complained about the supermarket oligopoly? Tesco, and its “rivals”, are beginning to dominate markets: their ability to cross-subsidise goods allows them to trample upon smaller retailers and their size allows them to squeeze more out of producers.

When the CBI calls for a “fit for purpose” corporate tax system, they mean even lower levels of taxation and even less enforcement directed at the big corporations. I doubt a review of the corporate tax system conducted by people from companies like Pfizer and the tax lawyers they employ will conclude that corporations don’t pay enough and get off too lightly for their transgressions.

Defend private equity firms! Defend private equity firms?
The CBI has also been campaigning to defend the reputation of private equity firms. There has been a flurry of takeover activity by these firms, which supposedly turn around firms to make them more efficient (that is to say, profitable).

Trade unions have sought to open a debate about the rise of private equity and its implications. The private equity purchase of the AA and subsequent filleting of the business has been cited as a typical case. From the perspective of workers laid off following a private equity buyout, these firms are ruthless asset strippers.

Any dispassionate analysis would conclude that private equity firms are subject to less regulation and have a greater interest in short-term profit than corporations. So, yes: they are ruthless asset strippers. There is not much that can be done for their reputation. It would be like trying to re-brand sharks as gentle creatures claiming that they are friendlier than dolphins.

What’s the deal, then?

Well, the supposed turnaround involves buying out a publicly listed corporation, ceasing the trade of shares on the market, and aggressively cutting back on wages and jobs. The grasp is not without immediate profit, but the intention is to sell the business back to the market within a couple of years.

And so, private equity firms have a short-term outlook: there is nothing beyond the first five year plan. Unlike the corporate form, where there can be shareholder activism and some limited scrutiny of the firms activities, the private equity is liberated from the corporate division of ownership and control.

Since the company’s assets are used to secure the funds with which it is bought, if this debt is not repaid the company could face cannibalisation – the best bits of being sold off. So even if there is no intention to break up the business and sell its component parts this could still happen.

Private equity firms are the asset strippers of the past, then, hoping that the historical record can be brushed aside with heaps of praise from the business press. The industry might be about “trimming the fat” but it is not productive or innovative – the fat is not replaced by muscle.

This has implications for the sustained economic growth that the capitalist system requires. With private equity there is no incentive for investment with an eye to future profit, little in the way of deferred gratification.

Why has there been a renaissance of private equity in recent years? Well, there has been something of an upturn in the global economy of late, and the private equity strategy of leveraged buyout is less risky than it is rewarding.

The latest craze?
I could go on at this point about private equity firms reflecting the parasitic nature of capitalism in the oppressor countries at this stage in the development of imperialism, but I don’t feel adequately qualified to elaborate.

I feel it is enough to say that the decline in manufacturing in favour of newer, more profitable though less productive industries is beginning to put a squeeze on what would have been known as the aristocracy of labour. No doubt it is logical to switch production to countries with lower labour costs from a purely economic standpoint, but the future stability of British capitalism is risked by a lack of political foresight.

Class mobility has almost ground to a halt in the UK and deference no longer exists amongst the proletariat. The ability – or even desire – of the ruling class to incorporate an upper stratum of more affluent workers is questionable in this era. Yes, there is talk of aspiration, but can it be met?

There is a greater awareness of the nature of imperialist exploitation, whether it is the wars being fought in the Middle East or working conditions in the oppressed countries. But widespread concern at the exploitation of workers in the “developing” countries and global poverty in the imperialist countries is not guilt; workers in the “industrialised” nations are not complicit in this institutionalised thievery.

Better days?
The globalisation of goods and services – and labour – has brought greater understanding among workers in the oppressor countries that they face the same enemy as workers in the oppressor countries. This globalisation does not eliminate poverty and oppression within the imperialist countries; all the boats do not rise with the tide and the disparity is stark.

A worst case scenario report by the Ministry of Defence of the “future strategic context” the imperialists’ face, that was publicised last month, conjured up, amongst other things, growing middle-class radicalism and a resurgence of Marxism. I for one do not worry about these two tendencies becoming more pronounced. Increasing numbers of class-conscious workers being joined by sections of the middle-class are exactly what capitalists fear.

Another concern of the 90 page report was climate change fuelled by carbon emissions. Imperialism and capitalism are not only injurious to people living today but may threaten the future existence of the human species through their failure to internalise costs to the environment. There can be no green capitalism, no eco-friendly imperialism, though this will be suggested in coming years; only a democratically planned and managed economy can solve the problems faced by humanity.

The future is far from certain, but I can confidently predict that the CBI’s report on the corporate tax system will call for cuts. They can’t help it…

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