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Cable: 'I love business, really'

Robert Peston | 08:28 UK time, Wednesday, 22 September 2010

Many uber-capitalists would tend to agree with Vince Cable's critique of capitalism - that it tends towards short-termism, that markets often don't work in a fair and efficient way, that vast rewards often accrue to the undeserving.

Vince Cable

But, they would add, history would tend to indicate that capitalism is the least worst system we have for generating wealth.

So what has caused the odd harrumph in British boardrooms, in reaction to the deliberate leaks by Mr Cable of extracts from his speech today to the Liberal Democrat conference, is that Mr Cable is accentuating the negatives about the behaviour of the private sector.

And that's not wholly trivial at a time when we all need the private sector to grow and flourish - if unemployment is to fall and living standards are to rise again - in order to take up the slack in the economy that is being generated by an unprecedented squeeze on public spending.

If the private sector believes the business secretary and government is hostile to its interests, then it'll invest less in the UK - and may even up sticks to those fabled foreign parts where business leaders are deified rather than vilified.

However Mr Cable is a complicated and misunderstood chap, as he implied on the Today programme this morning.

After all, it's him alone at the cabinet table battling on behalf of bigger British companies to allow more immigration into the UK from outside the UK (see my previous post Why businesses want to recruit from overseas).

And no one has shouted louder than he over the past couple of years on behalf of small businesses starved of vital credit by banks.

He has come to tame capitalism, rather than bury it - he might say.

And the truth is that there is nothing desperately novel in that aspiration. Every government since the fall of Margaret Thatcher and Ronald Reagan some two decades ago has - by stealthy increments - tried to make it their business to try and harness capitalism to minimise the bads and maximise the goods that it generates.

The problem is, some would say, that they did this in a piecemeal way that didn't get to the heart of the matter.

So perhaps it is a good thing that the business secretary wants to cast what he calls "a harsh light into the murky world of corporate behaviour."

After all, acknowledged experts - including the governor of the Bank of England and the chairman of the Financial Services Authority, who have hitherto done a good job of hiding any sympathy they might have for the SWP - assert that the banking crisis of 2008 is demonstration that the taming of capitalism has failed in a pretty fundamental way.

Lord Turner, for example, in his annual address to the City of London and in an interview with me yesterday renewed his swipe against his many predecessors at regulatory bodies and central banks who believed that financial markets are self-correcting, and that therefore light-touch regulation is good regulation.

One consequence is that Lord Turner and Mervyn King are both taking it upon themselves to meddle in the affairs of banks before breakfast, lunch and tea, to prevent them ever again holding the entire British economy to ransom.

Also, the recent Deepwater Horizon disaster is widely seen as proof that the boards of huge companies such as BP are not provided with adequate incentives to minimise what have colloquially come to be styled as high impact, low probability events - which is another way of saying that the big rewards go to those business leaders who have Nelsonian vision.

Vince Cable guru on all this seems to be Andy Haldane of the Bank of England - and Mr Haldane's recent monograph on "patience and finance" is the guiding text (see my recent post on this).

Which sets up something of a challenge.

This tendency of markets, especially financial markets, to encourage impatient herdlike behaviour rather than thoughtful, patient investment is not a new malaise: Keynes, for example, is withering about it, in the general theory.

If Vince Cable tries and fails to cure this great Anglo-American disease, he'll be part of a distinguished and long line of well-intentioned, disappointed minsters.

Update 1400: The heat has rather gone out of the pitched battle between Vince Cable as revolutionary vanguard and the boss class.

I think it was when the business secretary attributed to Adam Smith - father of market economics - the notion that "capitalism takes no prisoners and kills competition where it can" that Richard Lambert, director general of the CBI, recognised that Mr Cable was in fact wielding a loaded olive branch rather than a Kalashnikov.

The residual emotion among those killer capitalists is one of mild bemusement. They're not sure what it is Mr Cable will be endeavouring to fix when he shines his "harsh light into the murky world of corporate behaviour" with his promised consultation to be launched in October.

This review will be looking at "the questions of takeovers, executive pay and short termism generally", according to a briefing note from Mr Cable's office.

But this isn't terribly precise. And although Mr Cable has made plain his distaste for Kraft's takeover of Cadbury - which he sees as an example of bad money displacing the good - he presumably wouldn't want to rewrite company law on the basis of a single controversial deal.

It would help, some would say, if Mr Cable would say where he attributes the primary blame for what he perceives to be the failure of markets to allocate resources in a way that maximises employment growth, customer satisfaction and wealth creation for pensioners and other shareholders.

Is it that the management class in big companies doesn't want to listen to the owners, the shareholders?

Is it, as Lord Myners avers, that too many shareholders are unfit owners and lousy stewards of savers' money, who simply refuse to engage with corporate managers.

Or does Vince Cable triangulate and say it's a bit of both?

The fear in much of corporate and financial Britain, which has intensified over the past 24 hours, is that Vince Cable wishes a curse on all their houses.

That's probably wrong. But perhaps it's not ideal for him or for Britain that the private sector appears to be uncertain about "their minister's" basic convictions.

Comments

Page 1 of 3

  • Comment number 1.

    The reaction to Cable's remarks reminds me of the quote "The religion of the Englishman is the law of supply and demand" In modern capitalism the is no free market except in that free enterprise is hardly controlled. Their aim is to eliminate or manage competition. Throw the text books away.

  • Comment number 2.

    It is interesting how the big battalions in government and business have forgotten where it all began. No doubt this is convenient to them and their overweaning interests. They need to be careful.

    We will have to see what is in Mr. Cable's speech in due course but the propositions we have seen so far in the media suggest a reiteration of classical liberalism which opposes the egotistical style of hierarchy found in corporate culture these days.

    Personally I see no difference between the insufferable egotism of the unfortunate Charles I and his crazy court and the arbitrary power exercised by modern over-bonussed turbo-capitalists and their associates within the bloated over-rewarded state.

    To me the issue is the same: the majority need protection from an insanse and irrational minority. If common law and custom will not protect the majority from the depredations of a minority made mad by their wealth, then it will be left to the majority to set out to protect themselves.

    There is every good reason to avoid the latter course as it will lead only to common ruin. But if it becomes a choice between common ruin and slavery then I will have the ruin.

  • Comment number 3.

    If indeed short-termism and herdlike behaviour - the 'great Anglo-American disease' apparently, though I fear there are worse results from our 'special relationship' - is the main problem, and saolving this is indeed doomed to failure, then why not concentrate on a couple of issues which are more easily framed and resolved:
    - Bank of England act, end fractional reserve money and debt-based economy
    - UK Glass Steagall Act equivalent, separate the casinos from the utility retail

    In this environment people can be as short-termist as they like, and the World should continue to rotate very nicely

  • Comment number 4.

    Brilliant summary!

  • Comment number 5.

    Vince Cable has a point - there has to be a clear distinction in the city between real investment and short-term 'gambling'. Real business needs long term investment and the government should look at ways of encouraging this. How many people who buy shares actually do so because they really believe in investing in a company? How many just believe there is a short term jump around the corner and quite simply gamble on it?

    Banks are only keeping a facade of a lending department open behind the scenes 'computer says no'. Vince is right to go after bankers - whilst they may not be 100% responsible for the meltdown they have a moral obligation to help get this country running again rather than profit and run.

    I run a small business and a mantra I so often hear is "you are in business to make a profit". My retort is that I am in business to provide a service - if I do it well and efficiently I can make a profit ... I am not simply entitled to it. After all, I have no control of my clients bank accounts .... the bankers do however.

  • Comment number 6.

    Cable is pandering to the sandal-wearing Liberals as he pursues his populist agenda. It's fast becoming time when he was removed from government. Banks are being urged to raise their capital ratios, make less risks in lending but increase lending to small businesses in the face of reduced demand for loans. Rather than bashing the banks Cable should come up with more constructive solutions.

  • Comment number 7.

    Cable is a lightweight and all his rhectoric will come to nothing . The Lib Dems are a minority stakeholder in the government. Its just "Talk" for the delegates, who know they are going to get wiped out in the local elections.

  • Comment number 8.

    The reason business leaders are upset isn't because of some wishy-washy idea that the speech is anti-business. This is about greed.

    The reason business leaders are upset is that giving the owners of businesses, shareholders, more power threatens their pay packets. Executive salaries have grown exponentially over the last decade, during which time pension funds have stagnated and the banking system has collapsed, at huge cost to the taxpayer and the wider economy.

    The executive 'Long Term Incentive Plan', 'Total Compensation Scheme', 'Remuneration Committee' system is corrupt to its core. How do I know? I used to work for two of the largest remuneration consultancy firms (and there are only a handful of players in this pay consultancy 'market').

    Companies paid extraordinary sums to consultants who then searched the globe to prove the people who employed them where underpaid and designed complex pay schemes which paid out extraordinary pay in pretty much all circumstances. Why else would the consultants be employed or re-employed?

    For ordinary employees, companies have raced to the bottom, abandoning pension schemes, cutting salaries and benefits, citing lower wages in the developing world. For executives, these same consultants never compared using developing or lower paying countries, but nearly always the US and/or private equity.

    A national disgrace.

    There is a solution which would mimic the solution to a similar problem we have in our wider society. There should be one shareholder, one vote, on the approval of remuneration reports, irrespective of the size of individual shareholding. Let small shareholders and employees decide whether executive pay is reasonable, given that institutional shareholders have failed in their duties.

  • Comment number 9.

    "deliberate leaks" this seems rather an emotive phrase (IMO moderators), is there any implication of wrong doing?.

    I tend to agree with Anthoncon. Capitale is not a recent thing it can be traced back to the 12th century at least.

    The problem is imo it is the progress of having a global communications world and even openness which has eliminated a self checking to the run with the herd mentality or hearing a whisper.

    instead of using more emotive language such as murky world of business
    it may be better to accept that people have thought short term and of themselves ever since Adam eat the apple, the controls need to be on size not abstract economic philosophy

  • Comment number 10.

    He and everybody else knows the thing is broken and heading for disaster, again!
    Just crack on and get it fixed today, not tommorow, why drag it out with years of tweaking.

    Extreme financial inequality is one of the many problems to fix, its not hard but requires guts, so its not going to happen with this bunch.

    Also when is private debt going to be addressed, I see this as the weight on the nations shoulders holding back a recovery.

  • Comment number 11.

    I find it difficult being lectured by a politician about short-termism, pot, kettle, black etc. After all, how short term can it be to think that the solution to solving peoples addiction to debt is to not only nationalise that debt by rescueing the banks, but then to add to it further by basically paying people to dig holes and then fill them in again e.g add to the public payroll. How the powers that be can actually believe that a private sector in the midst of a rapid de-leveraging (just look at the amounts being paid back to banks by businesses and individuals) can be countered by increased government spending is beyond me. Seems like an exercise in postponement, but with a bigger price tag when the time comes ergo short-termism. As I say, people in glass houses.....

  • Comment number 12.

    Regulation, Markets and the Price Mechanism

    More regulation leads to dramatically reduced market effectiveness. The enormous danger in increasing regulation on, for example the banking and financial services sector, is that the regulation itself leads to a collapse in the effectiveness of market mechanisms. This is quite reasonably arguable as the cause of the recent economic disaster.

    An example: If you insist of ultra high standards of food hygiene regulation in the restaurant trade then fewer restaurants are set up as you have made it more difficult to set up new business. The same is true for example for hotels and insisting on fire exits etc.. All of these regulatory activities stop market operating effectively.

    This is precisely what happened in banking and financial services. The mechanisms of regulation were used as a protectionist shield for existing businesses and quite deliberately so, by the existing regulators (and this is why they must all be sacked!)

    In other words there is regulation and regulation. In particular the market intervention mechanisms available to the banking and finance sector regulators were deliberately and wantonly not used during the noughties to dampen down the irrational over exuberance of the market. What is more the regulators knew that they were doing this - again this is why they must go PDQ.

    PS
    I have recently been looking at a Post Office Savings book dated from 1929 to 1945 and it makes interesting reading - in particular from the point of view of interest rates 1929 5%!!! Where we should be NOW!!!! It is an absolute requirement that interest rates rise by a factor of 10 as without this shift regulation is dramatically compromised. Economically we can't get back to sanity without taking the hit that will flush out the poor quality debt and interest rates are the ONLY way to do this. And we must flush out the poor quality debt to be able to properly reconstruct the national and global financial system. Let me yet again make it clear that most of this poor quality debt (that is debt that cannot be afforded at sensible interest rates) is in the housing market and represents a dramatic overpricing of homes by perhaps 30% to 40% in some areas of the UK.

    Another way of looking at this is that the regulation of the housing market has been defective to the point of being non-existent! Mechanism might include capital gains tax on all house sales (abolishing the primary residence exemption) above a level determined by the ratio of the price and the average earning of the area, or just through dramatically increased stamp duty on similar price levels through to financial penalties on lenders who make excessive loans on property this simplest way is to put interest rates up and insist that mortgages shall suffer penalty rates on 'overpriced' property!

  • Comment number 13.

    #8. norwici wrote:

    "The executive 'Long Term Incentive Plan', 'Total Compensation Scheme', 'Remuneration Committee' system is corrupt to its core"

    Yes, but it has always been like that, hasn't it?

  • Comment number 14.

    There are signs that both sides of the coalition are beginning to listen to me!!
    Tax bonuses out of existence. That will deal with short-termism and almost eliminate the risk.
    Banks would become powerhouses again by driving industry to produce something actually useful to the benefit of the human condition.

  • Comment number 15.

    There are signs that both sides of the coalition are beginning to listen to me!!
    Make bonuses illegal. That will deal with short-termism and almost eliminate the risk.
    Banks would become powerhouses again by driving industry to produce something actually useful to the benefit of the human condition.

  • Comment number 16.

    Did you get the message??
    Didn't mean to send it twice but no harm done.
    If I were a politician I'd repeat it 3 times!
    So here goes.............!

  • Comment number 17.

    Boom and bust is a symptom of human nature and even nature in general. We are not going to get rid of it. Cable is shouting out populist headlines and then trying to appease the people that matter in the detail. Almost everyone loves bashing the bankers! Politicians are loving blaming the bankers as opposed to being blamed themselves. The rhetoric is only going to get worse as the 20% VAT rate comes in so as to deflect criticism from the government and public sector spending.

  • Comment number 18.

    Boom and bust is a symptom of human nature and even nature in general. We are not going to get rid of it. Cable is shouting out populist headlines and then trying to appease the people that matter in the detail. Almost everyone loves bashing the bankers! Politicians are loving blaming the bankers as opposed to being blamed themselves. The rhetoric is only going to get worse as the 20% VAT rate comes in so as to deflect criticism from the government and public sector spending.

  • Comment number 19.

    .Boom and bust is a symptom of human nature and even nature in general. We are not going to get rid of it. Cable is shouting out populist headlines and then trying to appease the people that matter in the detail. Almost everyone loves bashing the bankers! Politicians are loving blaming the bankers as opposed to being blamed themselves. The rhetoric is only going to get worse as the 20% VAT rate comes in so as to deflect criticism from the government and public sector spending.

  • Comment number 20.

    Wasn't Cable the bloke who was demanding that bank cashiers on 9k a year didn't get a Christmas lunch costing £30, whilst at the same time he and his colleagues were enjoying all sorts of "stuff" at the taxpayers expense without telling any body.

    He lost his tag as the man of wisdom long ago.

  • Comment number 21.

    Robert you comment that every government since Thatcher has striven to harness capitalism, perhaps that's where the story went wrong? all that seems to have happened is driven by falling margins in the global market, business has seen its job as harnessing government. Increasingly the large multinationals have been able to leverage government to such an extent that the electorate have become secondary bit part players. Witness the recent revelations in Private eye concerning the Vodafone/HRMC £6B tax scandal and we can easily understand how business holds the reins. It now appears that the latest proclamations by Cable are only set to be a diversion in the governments stage management of cutting public spending and taking from the electorate. This is not surprising, we do not have a vote for 5 years whilst business can up sticks and move tommorrow. The idea of the coalition to give power back to the people merely rests upon giving us the chance to pay for more, whilst business is allowed to create a low wage economy. The global market economy was only good for us whilst we maintained a lions share of world business, which sadly passed a long time ago.

  • Comment number 22.

    Where has the Head of the C.B.I. been for the last three years. If he considers Vince Cable's words inappropriate for a Minister. As head of the C.B.I. I thought it was his job to represent all business apparently not. How does he explain to the businesses that have been destroyed that it will be ok if we carry on as we have been. Is he only representing a small coterie of wealthy businessmen who could not care who they damage in the search for wealth? The business community does need an ethical clean up. Why is he surprised that a Minister should make such comments they are long overdue. Too long have the criticism and discussions of policy been held behind closed doors. If on the other hand he and his wealthy friends wish to assume the publics' investment in the banks so relieve us all of the grief they have caused he may have his past secret world of business. Just so long as he does not think that it will be allowed to carry on in the future. Vince was a voice of integrity and common sense whilst in opposition and his assessment was proved correct. What made the C.B.I. think it would alter in Government.More to the point why should it need to!

  • Comment number 23.

    Very thoughtful article, unlike news read today in a number of city publications!

    Purely in terms of a market model that Mr Cable ought to push, we should realise that companies have three types of stakeholders - shareholders (who had the upper hand till the last century); employees (who have started gaining in dynamic organizations such as consultancies and investment banks - a good thing); customers (who are looked after by regulators at retail level, but with a short term focus).

    The gaps - corporate customers require looking after (IBs make abnormal profits because corporate customers pay them abnormal sums of money); and within employees the middle/ lower levels require looking after.

    If this is addressed; bonuses are taken care of
    - short termism will cease in favour of long term customer value, and no issues with bonuses in that scenario
    - higher competition and lower charges will reduce abnormal profits in one sector
    - whatever justified profits exist will be more equitably distributed

  • Comment number 24.

    John from Hendon is insane , implementing his ideas would lead to massive shift in wealth to the super rich who still have massive credit facilities. The idea that houses should be worthless is bizarre . If property has no value the householders don't invest and you end up in slums . Cast you mind back to the sixties John when houses had no central heating , no double glazing ,outside toilets ? Part of this was relatively low income but the other part was there was no incentive to invest . Why invest in your property if there is no capital growth? Come to parts of the North and I will show you not one but 1000's of properties that are virtually slums because there is no incentive to invest because the house prices are low and there is no real chance of capital growth . Imagine the same areas after your master plan of reducing house prices by 40% overnight and imagine the cost to the NHS due to the physical and mental health issues that would occur .Investing in property is a good thing and capital increases are fundamental in keeping the housing stock in good condition.

    The only way out of current debt position for both personnel and government debt is the slow depreciation through a combination of low interest rates and managing inflation @ 2-3 % a year and no Labour Goverment "Investing/spending" our wealth in the next decade ot two.

    Wholesale changes are needed for the banking sector but this has got be done slowly with advanced notice of major changes to consumers and companies a like so they can prepare. Drastic changes in fiscal direction is simply irresponsible and fool hardy.

  • Comment number 25.

    Vince Cable is deliberately using strong words to force a debate and as a capitalist I would agree with him capitalism currently is only working for a very small percentage of the population whos time periods are weeks & months not years. Capitalism is broken when a perfectly healthy company is purchased then decimated by the acquiring company because the only way it could afford it was to slash & burn (et al the Kraft Inc way of business, capitalism is broken when thousands of jobs are lost in amalgamations but investment banks & advisors make millions this is not wealth creation its wealth decimation.
    Our manufacturing failed in the 70s & 80s not because we dont have good engineers or designers but because money was not properly reinvested long term back into those businesses and they became less productive & current with purchasers its not because of the higher cost of labour Germany has constantly killed that myth (so has companies like JCB, Rennishaw etc in the UK) The current city system is no longer fit for purpose and is definately at odds with national interest we are on the decline because of it and the models employed by China & India are on the accendency where the middle classes are growing quickly.
    Finally John-From-Hendon for many people coming up to retirement the best saving they are likely to have is their residence applying capital gains tax to subvert house inflation is plain crazy especially at a time of unbelievably low interest rates for savers (the banks and the bank of England are mugging savers). This is why I have no sympathy for banker bonus payments within the current environment they are effectively sealing them from savers & pension funds.

  • Comment number 26.

    What is said in public for the 'headlines' and to the party faithful often has little reality behind closed political doors.

    Too many poticians rely on the City of London to provide their pensions in the form of directorships and executive positions on the boards, to upset the grandees of the City.

    However their objection is interesting to note. Many of these institutions in the square mile are often owned by international companies around the world, so perhaps they are worried that their CEO in China or Hong Kong will pull the plug on their nice life style, and even they may have to face the queue at the Job Center on a cold Monday morning.

    It is not the city's reaction that is interesting, but the fear that it engenders within the board rooms.

  • Comment number 27.

    We would do much better to ignore 'big business' and concentrate on the smaller businesses - who frankly employ more people. Smaller businesses are less likely to get uppity and take their ball home every time somebody suggest they might be taking slightly more than their fair share of the cream.

  • Comment number 28.

    I find it fascinating that there is such concern that Dr Cable is critical of the operation of capitalism. We are all taught in economics of the phenomenon of market failure - and surely excessive risk emanating from excessive greed is a prime example of this. Too many people seem to forget that it was the greed of financiers, not least concerning the US sub-prime market, that was a principal cause of the present economic down-turn (and, indeed, possible recession). We are told that it was the failure of regulation that was a principal cause of this down-turn. While I will be the first to call for more effective regulation, how about the moral responsibility of those whose behaviour in the first place exposed all of us to the consequences of their excessive risk?

    Indeed, it is arguably even worse than this. We are experiencing a phenomenon whereby some bankers put us all in jeopardy because of the excessive risks they ran. This then put banks at risk to the extent that governments had to bail them out, thus adding significantly to public debt. Now we have the spectacle of financial institutions, some of whose members caused the present problems, demanding that governments slash public spending, whatever the cost to ordinary innocent people, otherwise they will not finance the deficits that they had a significant role in creating. What kind of morality is this?

    Moreover, I do not hear the protests that I think that we should against the spin of this government. They seem successfully to be telling us that we have no choice but savagely to cut the deficit now. This is not true, whatever the pressures of the successors of the gnomes of Zürich. Before May an alternative political judgement was in force which accepted the need for debt for a few years to save us all from the worst consequences of the financiers' excesses. That judgement remains as valid, and indeed superior, today. Whatever judgement is made now is part economic - but the selection of the judgement is political, for which this government alone must bear full responsibility.

  • Comment number 29.

    I find it fascinating that there is such concern that Dr Cable is critical of the operation of capitalism. We are all taught in economics of the phenomenon of market failure - and surely excessive risk emanating from excessive greed is a prime example of this. Too many people seem to forget that it was the greed of financiers, not least concerning the US sub-prime market, that was a principal cause of the present economic down-turn (and, indeed, possible recession). We are told that it was the failure of regulation that was a principal cause of this down-turn. While I will be the first to call for more effective regulation, how about the moral responsibility of those whose behaviour in the first place exposed all of us to the consequences of their excessive risk?

    Indeed, it is arguably even worse than this. We are experiencing a phenomenon whereby some bankers put us all in jeopardy because of the excessive risks they ran. This then put banks at risk to the extent that governments had to bail them out, thus adding significantly to public debt. Now we have the spectacle of financial institutions, some of whose members caused the present problems, demanding that governments slash public spending, whatever the cost to ordinary innocent people, otherwise they will not finance the deficits that they had a significant role in creating. What kind of morality is this?

  • Comment number 30.

    I find it fascinating that there is such concern that Dr Cable is critical of the operation of capitalism. We are all taught in economics of the phenomenon of market failure - and surely excessive risk emanating from excessive greed is a prime example of this. Too many people seem to forget that it was the greed of financiers, not least concerning the US sub-prime market, that was a principal cause of the present economic down-turn (and, indeed, possible recession). We are told that it was the failure of regulation that was a principal cause of this down-turn. While I will be the first to call for more effective regulation, how about the moral responsibility of those whose behaviour in the first place exposed all of us to the consequences of their excessive risk?

  • Comment number 31.

    Vince Cable is an agent of the free-market anarchists (i.e. Trotskyists), otherwise he wouldn't be in government.

    Cable just gets the bigger picture i.e. that capitalism has all but failed and he realises that there could be dire, nasty outcomes.

    Notice that the greedy free-marketeers have turned on him claiming he is now 'inside the tent' and should behave himself. Their greed simply blinds them to the risks to their rotten system.

    For all Cable's rhetoric, he and the coaltion govt can and will only be judged by outcomes (as with all politicians btw)....and they will be to protect the system.

    PS Robert mischeivously wrote:

    "If Vince Cable tries and fails to cure this great Anglo-American disease, he'll be part of a distinguished and long line of well-intentioned, disappointed minsters."

    ----------------------------------------

    As has been mentioned on here many times before....why do you think this has just been an Anglo-American disease?

    You need to think long and hard about that one, for the subject is unmentionable outside anonymous blog postings.

  • Comment number 32.

    "This tendency of markets, especially financial markets, to encourage impatient herdlike behaviour rather than thoughtful, patient investment is not a new malaise: Keynes, for example, is withering about it, in the general theory."

    Impatience, herdlike behaviour, greed.

    These are not symptoms of or results of financial markets. These are human attributes. Financial Markets just allow us to see it more clearly due to the electronic nature of the product and the speed this allows.


    The choice is simple. Either allow people a bit of freedom, and you will see them do what they have always done. Or put in place a system of control (of varying degrees of brutality) that prevents people doing what comes naturally... and pray for a benevolent dictator.

  • Comment number 33.

    But we don't have capitalism. Since when is privatising profits and socialising loses (the bail out) capitalism? That's exactly the OPPOSITE of capitalism. If he's talking about the kind of corporatism where they can control government and get special rights then I'm right behind him but that isn't capitalism. Not even close. Corporations are made of people yet governments use laws (most obvious is limited liability) to create entities that can excuse and not punish the shocking behavior.

  • Comment number 34.

    There is clearly a need to rein in some excesses as the market has not worked in the banking sector for a number of reasons.
    1) Lack of shareholder clout - in a very large corporation such as a bank, the shareholders are so diluted (even large institutional investors) to the point where CEO's have near absolute power.
    2) Because of the point above and a lack of understanding of product risks remuneration stopped being aligned with the best interests of the shareholders - i.e for long term low risk growth (Banks after all were meant to be "blue chip" stocks).
    I think therefore that Vince Cable has a point (and I am not normally one to agree with him) that if the market fails to stop this sort of behaviour then the regulators must (again much against my natural instinct as an uber capitalist).
    The key difference here is if a normal private sector company pays excessive amounts and encourages risky behaviour it goes bust with no (or little) impact on the rest of us - if a bank fails we all catch a cold - for this reason pay must match shareholders best interests, I think the best way to do this would be to have a list of organisations who can only pay above a certain level (say £100K) in long term share options.
    I have no problem if this results in a £5M pay packet in say 5 years time, but it would help to stop short term casino banking.

  • Comment number 35.

    I see no controversy in Vince Cables remarks. I think he has come to realise how most industries come to be dominated by 4 industry players where the actions of those 4 are to the detriment of all other potential competitors like increasing barriers to entry.

    How many instances in the modern world has the description 'Big 4' been used to describe many industries.

    The problem with so few major players is that if one player decides to pursue something controversial but profitable. The rest have to follow suit. Many people forget that HSBC was criticised severely in the run up to the credit crunch for not participating in the speculation on the dodgy CMOs that brought it about.

    Many commentators have spoken about BSkyB, but i think there is more in this from the recent investigation into the 'Big 4' Cement/ Aggregates producers.

  • Comment number 36.

    This rubbish coming out of politician's mouths is getting very tiring. I am increasingly finding the political rhetoric on bankers similar to the persecution of the Jewish in Germany, the Asians in Uganda or the white farmers in Zimbabwe. i.e. spend enough time bashing them and blaming them for your problems, they will end up leaving and your economy will collapse.

    It is time politicians started looking out for the good of this country rather than spending time trying to score cheap political points.

    If Cable really wanted to show his support for business, he would talk about encouraging industry or increasing Britain's competitiveness, not spend time scoring points with his party on bankers. However genuine Mr Cable seems to be, in the end he is just another politician looking out for himself.

  • Comment number 37.

    25. At 10:39am on 22 Sep 2010, jeffa4444

    Great post, but as I understand it, Vince Cable is pro cuts which I believe will provide just as big a slash and burn effect as the asset strippers.

  • Comment number 38.

    Good on Cable for having the guts to stand up and try and sort this mess out. Whether he will succeed is of course another issue, but at least he's willing to try.

    It's also about time someone was willing to deliver a message that might upset 'the markets'. We as a nation are held to ransom by these financial markets because government after government has done nothing but encourage them to get too large. This was all well and good while they brought in quick cash, but of course it's a terrible long term idea. Hopefully Cable can tell the markets where to go, and we can start investing in some real businesses that actually generate long term wealth.

  • Comment number 39.

    Govts have been trying to tame capitalism for centuries. More often than not they end up making the situation worse.

    If you want to tame capitalism you need:

    1. Clear anti-trust/anti-monopoly laws. We have those already.
    2. Rules about health and safety of products. We have innumerable rules about those.
    3. Laws relating to product description (ie no lying about what it does). We have those.
    4. Some rules to prevent big companies legging over customers and small suppliers with silly contractual terms. We have those.
    5. For certain types of sectors you need rules about process. So banks get capital adequacy rules, farms got rules about care of animals

    Now I am all in favour of those rules being looked at on a regular basis.

    Other than that I am against laws to apply specifically to business which do not apply to the general population. The simply reason is that I do not trust politicians.

    For example Vince would like to stop short term share sales during a takeover. The equivalent EU politician actually wants to control who shareholders can sell their shares to. Or to put it another way, politicians do not want the public to have the freedom to dispose of their assets as they see fit which is just a more cuddly version of politicians owning everything (which is communism)

  • Comment number 40.

    #24. hughesz wrote:

    "John from Hendon is insane , implementing his ideas would lead to massive shift in wealth to the super rich who still have massive credit facilities. The idea that houses should be worthless is bizarre ."

    Where on earth did you find that I said that houses should be worthless? Please re-read my posting.

    The implications of the lack of regulation in the noughties (and before) has been the totally unsustainable inflation in house prices supported by insane credit regulation policies.

    You appear to acknowledge the same problem that I diagnosed ages ago - however what we are arguing about is how to engineer a re-pricing. I consider that a prolonged Japanese solution (that you suggest) will first of all, as shown by the Japanese, not actually fix the problem and secondly not be effective because it relies on a continued political will and regulators integrity - both of which are entirely absent from the economy/politics.

    We both acknowledge that the problem is 'the problem' - however after long consideration I have come to the conclusion that debt-deflation is best done if it is done quickly and not by a slow strangulation of the economy that you appear to advocate. Metaphorically I think of excess low quality debt (the problem) as a gangrenous limb that needs rapid amputation if the body is to saved.

  • Comment number 41.

    #25. jeffa4444 wrote:

    "Finally John-From-Hendon for many people coming up to retirement the best saving they are likely to have is their residence..."

    Let me explain something about annuity rates these essentially reflect interest rates - so a lower house price accompanied by an increase in interest rates will give you the same pension as it would now. Essentially the bankers stole your capital gain long ago, with the connivance of Mervyn King!

  • Comment number 42.

    Robert, "This history shows capitalism is the least worst system for generating wealth, " comment. In the last 40 years it's been quite obvious that people's ability to sign a loan agreement has been instrumental in promoting growth and NOT because of entrepreneurial activity.

    Printed Money has been pumped into the system in unimagineable quantities....and now the bubble has imploded. A few die hards at the top are desperate to keep the old system going.

    Our latest crisis was caused by Capitalists, using full-blown capitalism. They were given everything, light touch regulation, Union eradication, laws skewed in favour of the employer, tax breaks, million pound salaries and bonuses. All they had to do was create a few jobs in return and keep the Capitalist charade going....

    Capitalism might be less worse than the others, but that does not mean we simply have to carry on polishing the tu*d that it is and change nothing! Capitalists who assume profit is the ONLY imperative are just being thick! By virtue of being blind to what's been going on around them for the last 2 years at the very least, and in the last decade as a whole.

  • Comment number 43.

    I want free markets were the customer has choice. In Banks and Food retailthere is very little choice.

    It was the Tories under lady T that broke up the "monopolies" of the brewing industry with Pubs,

    So the same should be done with the Banks and the likes of Asda,Tesco,Sainsbury,morrisons etc as they are all having an adverse effect particulary on farmers etc

  • Comment number 44.

    #33 that because GB did not understand capatilism and that HBOS,RBS and NR were all in labour heartlands so they had to be bailed out rather than constructively shutdown and sold off. Then the big pensions to the leaders would have vapourised and that would have be fair and right on the money.

  • Comment number 45.

    Within this discussion of murky business practices the position of accountants ,auditors and special advisors appears not to have come underscrutiny. I do not even recollect Robert Peston dealing with this aspect of business with his surgical analysis. It would be impossible for an auditor carrying out his normal duties responsibly not to know that there were risky schemes within the banking sector. As we are led to believe that the modern graduate auditor is more capable than his non graduate predecessor they should have been well equipped to evaluate risk in the banking schemes. I do not ever recollect an audit report of a bank which drew attention to the lending policy risks . One has to wonder whether the principals' of the audit firms who signed off the accounts were intimidated by the shear size of the banking groups. It is one of many questions of auditors which I believe has not yet been addressed and should be. Moving forward is the true independance of audit practitioners guaranteed by current by leglislation to call foul when discovered in the future. Or are we looking at yet another city club of insiders.

  • Comment number 46.

    36. At 11:27am on 22 Sep 2010, TheD wrote:
    This rubbish coming out of politician's mouths is getting very tiring. I am increasingly finding the political rhetoric on bankers similar to the persecution of the Jewish in Germany, the Asians in Uganda or the white farmers in Zimbabwe. i.e. spend enough time bashing them and blaming them for your problems, they will end up leaving and your economy will collapse.


    I think that's the most bonkers post I've ever read on this blog.

  • Comment number 47.

    It makes once again the point that politicians these days are 'professional', ie eton, cambridge, looking after a senior government minister then gaining a seat off the work done, getting in then running the country.

    At which point have they actually had experience of the majority of electors or population and working for a living?
    All that is said now is out of a text book not real world having to get the product produced to the quality or then chasing up accountants who will not pay up due monies.

    I do agree with the main point that investment should be for the long term as the short term investments have shown many times over

  • Comment number 48.

    "17. At 10:06am on 22 Sep 2010, SirLoseaLot wrote:
    Boom and bust is a symptom of human nature and even nature in general. We are not going to get rid of it. "
    Nonsense. Its the result of relying on private banks to self regulate the money supply through the fractional reserve banking system. There aim is profit not maintaining a stable money supply. They have proven they are not capable to doing the job.

  • Comment number 49.

    "17.
    Boom and bust is a symptom of human nature and even nature in general. We are not going to get rid of it. "
    Nonsense. Its the result of relying on private banks to self regulate the money supply through the fractional reserve banking system. There aim is profit not maintaining a stable money supply. They have proven they are not capable to doing the job.

  • Comment number 50.

    "17.
    Boom and bust is a symptom of human nature. "
    Nonsense. Its the result of relying on private banks to self regulate the money supply through the fractional reserve banking system. There aim is profit not maintaining a stable money supply. They have proven they are not capable to doing the job.

  • Comment number 51.

    "17. re comment about boom and bust"
    Nonsense. Its the result of relying on private banks to self regulate the money supply through the fractional reserve banking system. There aim is profit not maintaining a stable money supply. They have proven they are not capable to doing the job.

  • Comment number 52.

    Sorry for the repeats, having computer problems

  • Comment number 53.

    My advice would be to get an allotment, dig a big hole, and bury a banker. Any banker will do, but the plump investment ones are best. Ensure you first remove any bonuses or share options still clinging to it.

    You'll be rewarded by a very good crop of fruit and veg, and the satisfaction of knowing exactly where your food comes from.

  • Comment number 54.

    The problem with the analysis as posited by Mr Peston is that the supposed faults of capitalism, "that it tends towards short-termism, that markets often don't work in a fair and efficient way, that vast rewards often accrue to the undeserving." are equally or even more true about many other systems of human existence (try the socialism of N Korea for example)than about capitalism. And, to go further, "capitalism is the least worst system we have for generating wealth". Actually it is by miles the best system ever invented in human history for generating wealth and, in free societies, for allowing inclusiveness on a scale never witnessed before. The example is raised of BSkyB - a self created service, in an industry open to almost anyone, open technology and freely available rights. Who else has developed the Plus system , 3D tv, round the clock sports etc etc? No-one, and millions want it , hence they pay a premium. How many internet millionaires have been created by people working from their garages or bedrooms? thousands but all evryone else does is carp that Mr Gates developed MicroSoft and gave computing power to the world. Some folks should be a little more gracious or they will get what they least wish for - decline and decay.

  • Comment number 55.

    The Roman Emperor Augustus famously said he found Rome built of brick and left it built of marble.

    Capitolism has raised mankind to the lofty hights we now enjoy.

    So what is broken?

    I would say that capitalism has lost it's way.

    Most capitalists these days concentrate on maximising profit, yet profit is a by product of buisness activity, a goal, not the be-all and end-all of everything. As Kenny Rodgers sang 'you never count your money when youre sitting at the table, there will be time enough for counting when the dealings done'.

    Why do we have so many accountants?

    Charles Handy asked this in 1988, he commented on West Germany (Pop 81 Million) having 4 thousand, Japan (Pop 120 Million) having 7 thousand and the UK (Pop 60 Million) having 125 thousand! (and increasing at 10 Thousand/year).

    We still have 5 thousand new accountants per year. Just think if we put EVERY accountant up against the wall we would still have more than enough within 12 months.

    Accountancy is responsible for short-terminism, for failing to invest in anything other than a cast-iron certifed profit making venture. It stops work, slows growth, allows the 'bean-counters' to rule the roost (it's the quickest way to the top in the city).

    Yet all an accountant can do is look at the balance sheet, nothing else.

    They do not care if they cause misery with there decisions, as long as the balance sheet looks good. This is why the governments can see no other policy than cuts.

    Lets recapture business, make that it is all about improving mankinds lot and not just about how much profit.

    To paraphrase a sporting metaphor:

    "We are not in business to create A profit, but to create an environment where profits are inevitable".




  • Comment number 56.

    41. At 11:59am on 22 Sep 2010, John_from_Hendon wrote:
    #25. jeffa4444 wrote:

    "Finally John-From-Hendon for many people coming up to retirement the best saving they are likely to have is their residence..."

    Let me explain something about annuity rates these essentially reflect interest rates - so a lower house price accompanied by an increase in interest rates will give you the same pension as it would now. Essentially the bankers stole your capital gain long ago, with the connivance of Mervyn King!
    =================
    John, when I sell my large expensive house and move into something smaller I shall certainly not be investing the proceeds in an annuity. I was caught on that one when my small pension fund matured and I was forced by Invland Revenue rules (now changed) that forced me to buty one.

  • Comment number 57.

    @ 6. At 09:14am on 22 Sep 2010, Anthoncon wrote:

    > the sandal-wearing Liberals

    You might be a little less grumpy if you acquired a comfy pair sandals yourself.

    > It's fast becoming time when he was removed from government.

    Fat chance - thanks to the wisdom of the British people, tories would be out of office before they could say Jack Robinson if they ousted him now. Nope - they're stuck with the coalition or opposition. That's what they get for being so greedy!

    > Rather than bashing the banks Cable should come up
    > with more constructive solutions.

    They need a good bashing, for bringing Britain into disrepute. Many of us are disgusted to share our country with these sociopathic pariahs. Instead of making sniping little comments from the sidelines, why don't you suggest a way for teaching these bankers a lesson?

  • Comment number 58.

    @ 38. At 11:50am on 22 Sep 2010, jizzlingtons wrote:

    > Good on Cable for having the guts to stand up and try and sort this mess out.

    One way or the other, we've got to get these pigs away from the trough. Let cable has a go ...

  • Comment number 59.

    spareusthelies 42 is spot on.

    Everything was weighted in the favour of Capitalist which lead to the destruction of jobs and communities - not only coal mines and unions but witness what the Supermarkets do to small businesses and suppliers and what banks did with outsourcing decent jobs as examples.

    Now their last bastion in the illusion of high house prices (not value) has burst and with it I estimate £2Trillion owed over the next 30 years as no-one dares even open the book on the long term cost of public sector pensions which has not as yet been provisioned.

    Do you think the theives in the City will contribute anything to this financial hole they created? Quite the opposite, they will merely exacerbate it by putting the juggernaut back on the road to nowehere.

    When will people learn value ahead of profit and cost/price?

  • Comment number 60.

    spareusthelies 42 is correct

    Everything was weighted in the favour of Capitalist which lead to the destruction of jobs and communities - not only coal mines and unions but witness what the Supermarkets do to small businesses and suppliers and what banks did with outsourcing decent jobs as examples.

    Now their last bastion in the illusion of high house prices (not value) has burst and with it I estimate £2Trillion owed over the next 30 years as no-one dares even open the book on the long term cost of public sector pensions which has not as yet been provisioned.

    Do you think the theives in the City will contribute anything to this financial hole they created? Quite the opposite, they will merely exacerbate it by putting the juggernaut back on the road to nowehere.

    When will people learn value ahead of profit and cost/price?

  • Comment number 61.

    spareusthelies 42 is correct

    Everything has been weighted in the favour of Capitalist which lead to the destruction of jobs and communities - not only coal mines and unions but witness what the Supermarkets do to small businesses and suppliers and what banks did with outsourcing decent jobs as examples.

    Now their last bastion in the illusion of high house prices (not value) has burst and with it I estimate £2Trillion owed over the next 30 years as no-one dares even open the book on the long term cost of public sector pensions which has not as yet been provisioned.

    Do you think the theives in the City will contribute anything to this financial hole they created? Quite the opposite, they will merely exacerbate it by putting the juggernaut back on the road to nowehere.

    When will people learn value ahead of profit and cost/price?

  • Comment number 62.

    spareusthelies 42 is correct

    Everything has been weighted in the favour of Capitalist which lead to the destruction of jobs and communities - not only coal mines and unions but witness what the Supermarkets do to small businesses and suppliers and what banks did with outsourcing decent jobs as examples.

    Now their last bastion in the illusion of high house prices (not value) has burst and with it I estimate £1.5-2Trillion owed over the next 30 years as no-one dares even open the book on the long term cost of public sector pensions which has not as yet been provisioned.

    Do you think the theives in the City will contribute anything to this financial hole they created? Quite the opposite, they will merely exacerbate it by putting the juggernaut back on the road to nowehere.

    When will people learn value ahead of profit and cost/price?

  • Comment number 63.

    @ 38. At 11:50am on 22 Sep 2010, jizzlingtons wrote:

    > Good on Cable for having the guts to stand up and try and sort this mess out.

    One way or the other, we've got to get these pigs away from the trough. Let cable have a go ...

  • Comment number 64.

    46. Love your work Brother Morpheus!

  • Comment number 65.

    But, they would add, history would tend to indicate that capitalism is the least worst system we have for generating wealth.

    Is this the view of the 43 million US citizens living in poverty(http://www.bbc.co.uk/news/world-us-canada-11332635%29, and the 13.5 million UK citizens in the UK living in poverty(www.poverty.org.uk/01/index.shtml) and that is before we start adding in those sacrificed to poverty at the alter of austerity?

    It may be reasonable to assume the reason why the public sector grew under Labour was simply because the private sector failed to deliver the jobs and benefits to the UK population as a whole - so the government stepped up to the plate.

    If that is the case then perhaps Vince is kicking them for failure to deliver us to the promised land of prosperity. Is he telling business leaders the truth - that they are complete failures from the perspective of UK citizens?

    As you say, Vince is a complicated man. He is sitting at the table where the solution, an increase in UK poverty is seen as the route to success. He hasn't left that table in disgust.

    He and those sitting at the same table haven't made it law for BP et al to use remote shut down devices in the North Sea, haven't changed business law requiring them to maximise distributions that include taxes (thus inhibiting the tax-dodging constructs), they haven't doubled the minimum wage, they haven't limited top salaries at an organisation to a maximum of ten times the salaries of those at the bottom or anything else that would start to address the problems of the ordinary people of this country.

    Instead there was an immediate rush to slash and burn the benefits of the very poorest, attacks on public sector workers, science, engineering and research, as if they were participating in a sick 'Presidential First 100 days' of scalpel at our society.

    I suspect it is theatrics to keep the furious lib dem party members onside. No more than that.

    An early pantomime season this year. Everyone should be watching. You might not be able to afford the ticket of a TV license next year to watch the old Dame give a fine performance!

  • Comment number 66.

    I think Vince Cable could do useful things at this point:

    1) reserve the term "Investment Banker" for business whose primary function is to borrow short & lend long. It's time to call a spade a spade, and businesses whose primary role is bond and currency trading (presumably spivs in Cable-speak) are not "Banks" in any way I understand the use of the word.

    2) print lots of Banking licenses. It's clear in his words that the Banking market isn't working properly so the only solution we have is to massivley increase the level of competition - in effect to reverse what happened a couple of years ago when Banks merged and/or swallowed the weak to the point there simply aren't enough players today.

  • Comment number 67.

    The really irritating this about Vince Cable's comments is that it perpetuates the myth that all business people are involved in "murky" dealings. That we're all ogres hungry for profit and care nothing for the consequences.

    Of course there are some immoral corporate decisions in companies both big and small, but that's no reason for the Business Secretary to tar us all with the same brush.

  • Comment number 68.

    Last week, we learned that the Pope was, in fact, Catholic.

    This week Vince Cable tells us that capitalism doesn't necessarily always work towards the best interest of the consumer.

    Next week, perhaps we will learn something of the toilet habits of bears.

  • Comment number 69.

    36. At 11:27am on 22 Sep 2010, TheD wrote

    The Jews were innocent, and did not, I repeat did not, destroy the global economy and then hold everyone to ransom for more dosh.

    Unlike financial spivs.

  • Comment number 70.

    No one seriously doubts that capitalism is the most effective way of wealth creation, it maps onto human drives and aspirations far more effectively than any alternative.

    The problem that has been so starkly illustrated by the banking collapse is that some sectors of the economy demand regulation so that the failure of one sector does not threaten stability of the country. Let the investment banks do what they like so long as it's only bad news for them if they fail.

    Also - what are "disappointed minsters" ?

  • Comment number 71.

    46. At 12:14pm on 22 Sep 2010, Morpheus wrote:
    I think that's the most bonkers post I've ever read on this blog.


    It's really worrying to see a conflation of the innocent with the gamblers. It's a technique used by the Tea-potty crowd in the US.

    I do hope theD is just dense and harmless, rather than someone paid troll by the financiers!


  • Comment number 72.

    Vince "20/20 hindsight" Cable, we have had years of Cable telling us how (after the event) he would have done it a different way. Now he has an element of power lets see what he does. Oh yes my small business was refused credit again this week, we only have 25yrs of good trading history and the credit isn't to pay wages or buy stock its too expand our premises to meet demand.

    Thanks Vince for getting the banks to lend to us again, your doing a great job.

  • Comment number 73.

    I attended a talk at the Hay Literary Festival earlier in the year when the Chairman of HSBC was subject to questioning by the audience. A recently retired Stockbroker to ask about the function of Investment Bankers. His confusion lay in the fact that on his working analysis they were neither investors or bankers, but rather market gamblers with only their own interests and earnings at heart. This comment received enormous support from the audience.

    We have to recognise greed and understand it. Its either Gecko greed where the few think its a good thing, or a very dangerous and destructive motivator in which case it has to be controlled for the greater good.

  • Comment number 74.

    53. At 12:37pm on 22 Sep 2010, HamAndStilton wrote:

    My advice would be to get an allotment, dig a big hole, and bury a banker. Any banker will do, but the plump investment ones are best. Ensure you first remove any bonuses or share options still clinging to it.

    You'll be rewarded by a very good crop of fruit and veg, and the satisfaction of knowing exactly where your food comes from.


    - So money can grow on trees then?

    In all seriousness I agree with your sentiments, and Robert has a valid point on VC becoming another 'disappointed minister'.

  • Comment number 75.

    59 through to 62 M_T_Wallet (in writing your handle I see the joke - nice! Yes I'm slow) You mention Public sector pensions. Thought you might like to see this from Morgan Stanley UK. Apologies to those who feel it's too 'off thread', or don't like the public sector contraction arguments. Much like immigration etc... I feel we're all better off talking about these things rather than branding those who do as racists or fascists etc...

    Anyway, from Arnaud Mares at Morgan Stanley...

    "There exists a broad range of liabilities that are debt, yet are not captured in national accounts. To take one example, in March 2008 the UK Government Actuary Department valued the government's unfunded civil service pension liabilities - that is, the contractual claims on government accumulated to date by civil servants - at £770 billion. That is 58% of GDP, not captured by the debt/GDP ratio"

  • Comment number 76.

    #55 - you do know that it is a legal requirement of company directors to maximise shareholder value don't you? (Companies Act) This is done by maximising profits.

    If the directors said to hell with that, we want to teach the world to sing (in perfect harmony) then they would be breaking the law.

    A Business Secretary should be pro-business. Fortunately, I don't see this government lasting long. At the next election, the Lib Dem vote will collapse which will usher in a Tory majority. Then the government can really focus on cutting the fat off the hand-out state.

  • Comment number 77.

    24. At 10:38am on 22 Sep 2010, hughesz wrote:
    John from Hendon is insane , implementing his ideas would lead to massive shift in wealth to the super rich who still have massive credit facilities. The idea that houses should be worthless is bizarre . If property has no value the householders don't invest and you end up in slums.


    Householders will live in slums if they don't see their property as being worth anything?

    Really?

    Might be true of landlords in some parts of the UK but here we have a government that knocked that on the head by doing what governments should do writing laws to protect the interests of the citizens.

    Are you saying if you don't think you can make money in your home you would just leave busted windows, busted pipes, not fix the heating, not decorate, just not bother?

    You'll freeze in the winter and the damp will damage your health! So we can assume your health isn't worth bothering with because, well, how do you sell that?



  • Comment number 78.

    42. At 12:01pm on 22 Sep 2010, spareusthelies wrote:

    Well said that man!

  • Comment number 79.

    If Vince Cable tries and fails to cure this great Anglo-American disease, he'll be part of a distinguished and long line of well-intentioned, disappointed minsters.

    As far as I can see, this Capitalist system has actively selected those with the 'disease' of not being able to see further than a)the end of their own greedy nose or b)the end of their own massive pile of money if they have a particulary olfactory appendage.

    You can't cure them Robert. You quarantine them and ensure you don't select any more of them. Somewhere out of harms way. Like road diggers or something.

  • Comment number 80.

    John_From_Hendon, a question if I may? Is your mortgage paid off? For info mine is not.

  • Comment number 81.

    At 1:05pm on 22 Sep 2010, copperDolomite wrote:
    But, they would add, history would tend to indicate that capitalism is the least worst system we have for generating wealth.


    Instead there was an immediate rush to slash and burn the benefits of the very poorest.

    **********************************************************************

    However please remind yourself that a large amount of poverty in this country is self induced. I work in a sector surrounded by it so it see it first hand.

  • Comment number 82.

    For some things capitalism and market forces work well. For others they give a delusion of working that is commonly not recognised as such until the consequences are severe.
    For consumer products markets appear to work well enough. We get cheap goods and those able to manufacture and distribute them most efficiently get rich. There is some essential regulation, e.g. of electrical safety.
    For other areas the market seems to serve us badly. Often these are areas where we don't really understand what we are buying, but want to be re-assured that we've made a good choice.
    It's not surprising that children and their parents want good exams grades. It's not surprising that parents seek schools with a track record of getting good grades. It's not surprising that schools seek syllabuses and examinations that appear to offer better opportunities to get good grades. It's not surprising that exam boards, who are nothing without candidates, seek ways to allow grades to improve. Therefore, it's not surprising that Children, Teachers, Schools, Parents and Exam Boards all conspire such that grades are getting better all the time. It's not surprising that a 2nd or 3rd term government accepts this as fact and believes in its apparent success. Equally, it's not surprising that employers are finding that despite ever higher levels of examination achievement they face a shortage of skilled people. It is suprising that for-profit corporations are allowed to publish the text books, the teachers' notes and operate the examination system.

  • Comment number 83.

    @ copper dolomite 65

    Enjoy your posts, thanks for the libel link yesterday, had a quick skim but made a hard copy for bedtime reading tonight. i see the mclibel trial is in there. loved that comedy!

    Don't you think it is worrying that we are all screaming blue murder about the cuts the bankers have caused. After all, they are yet to be made. i fear for what will happen when they start to take effect, in ireland the budget will be just before christmas this year and the government are talking it up as if more taxes and cuts are just what the doctor ordered, the more the merrier for the good of the people. the last round were crippling and this time they aim to go further.

    At the same time they are paying down debt by taking more debt at ever increasing rates while tax returns are plummeting. Unemployment is still rising and the universities are full to bursting with people being paid to study rather than be on the unemployment register. the figures are way higher than 10%, migrants have returned home in their tens of thousands and more leave by the day. There is NO demand, every shop has 70% off.

    Just more cuts required and Ireland can be nicely brought back to the stone age.

    It's extremely worrying as the condems seem to be following the same path.

    The corporates have won, haven't they? Small business is doomed, less choice for all, more profit for them and if we don't like it? Well,(even with a quick skim) your libel document tells me all I need to know about any legal methods we could try.

    To take some beatles lyrics completely out of context.

    A message to the condems.

    You say you got a real solution
    Well, you know
    We'd all love to see the plan
    You ask me for a contribution
    Well, you know
    We're doing what we can
    But when you want money
    for people with minds that hate
    All I can tell is brother you have to wait

  • Comment number 84.

    76. At 1:31pm on 22 Sep 2010, Lindsay_from_Hendon wrote:
    A Business Secretary should be pro-business. Fortunately, I don't see this government lasting long. At the next election, the Lib Dem vote will collapse which will usher in a Tory majority. Then the government can really focus on cutting the fat off the hand-out state.


    Brilliant!

    Think of all the additional levies we could raise from corporations who benefited disproportionately from the advances in science and engineering made by all those university-employed scientists, paid for by tax-payers over the generations.

    All those back bills will whip em into understanding the real cost of their businesses. Wouldn't that be great Lyndsay...




  • Comment number 85.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 86.

    Mods, you have a bug in your system.

    Everytime I submit a comment, the last comment at the bottom of the screen is always 1. At 08:47am on 22 Sep 2010, watriler

    Number 1 does not follow number 83 in any counting system I've ever come across.

  • Comment number 87.

    Mods,

    And when I click on 'Post comment' a dialog box tells me I've already said that. When I haven't.

  • Comment number 88.

    John_of_Hendon wrote:
    Another way of looking at this is that the regulation of the housing market has been defective to the point of being non-existent! Mechanism might include capital gains tax on all house sales.

    John this is a tax on the owner who likely has already paid excessive interest to the banks & building societies for his primary residence the only part you posted that made sense was taxing the lenders who fuel with estate agents rampent house inflation after all no one wants to pay inflated prices for housing. Secondly prices in the UK are equally inflated due to under-supply of new housing stock. This in itself is made worse by the inbalance of work across the UK making the south east in particular very expensive whilst parts of the north east and scotland have room for housing but do not have the jobs.
    Your answer to this problem is too simplistic for a start in Europe far more people rent accomodation but its of a higher quality at better rents than the UK generally just take a look at Berlin as an example.

    Vince Cable is right to challenge the present set-up the Kraft Inc acquisition of Cadbury PLC should be a warning to us all that the only winners were the get rich quick hedge funds, advisors, investment banks, legal profession & PR companies. When Kraft opens a new £40M manufacturing facility in the UK (not just investment in present facilities) then maybe you can say its capitalism working for everyone, but generally that not the case as we have seen Kraft immediately cut jobs and moved to centralise in the US its time Britain looked after inself.

  • Comment number 89.

    Vince Cable is supposed to be a trained economist and yet he demonstrates he doesn't understand Adam Smith. Smith was quite clear that it is not capitalism that kills competition, regulation does. Smith recognised that business people will tend towards trying to rig a market but Cable fails to recognise that Smith also said that it is only the power of governments that enables them to do it. I always find it amusing that socialists complain about capitalism and free markets and then try to introduce lots of regulation and proctectionism of national champions. All that the regulation and protectionism does is increase inefficiency and creates barriers to entry. Consider that if the socialists had been in charge for the last 70 years, we'd all be working down the mines or building ships today i.e. very hard work and not much fun. If they'd been in charge from the 70s we'd all be churning our Austin Allegros.

  • Comment number 90.

    Vince Cable's critique of capitalism is not quite mine. Cable is too kind.
    Mine: the state of capitalism tends towards profiteering benefitting the few over the many (the elite over the slogs), markets are skewed, not dependent on supply and demand, but on hedging, manipulation and therefore, artifically generated supply & demand, and lastly the working slog for the most part, never gets close to sharing the wealth.
    How do we know that capitalism is the least of the worst?
    Define capitalism, and you will see that real capitalism does not have artificial supply and demand, or hedging, or manipulation; in short, in today's world we do not have real capitalism. We have greed run rampant - people that take advanatge of distorted (sometimes legal, sometimes illegal) profiteering. How about we call it: "Capitalism for the Elite", or CE)?
    We need the private sector to grow and flourish, but how can it when the CE have mega-monopolies, most often governmental protection of various sorts, a supply & demand that is skewed, bent and distorted into unrecognizable real supply & demand and...well...let's just label it CE.
    Why is there an unprecedented squeeze on public spending?
    Because all the private money is in the hands of the CE who evade taxes, really don't care about the working slog. In fact, I would go as far as to say: The elite feel there are too many working slogs (makes it hard on pension requirements and healthcare, etc.): CE would like to see the overall numbers of slogs diminish.
    Why have small businesses been starved for vital credit? The public word is that banks are afraid of the capitalization requirements; they don't know how much available capital they have to lend. This is bull!
    You will find these same CE banks - betting, gambling, hedgining - "investing"; this is why we must seperate regular banks from investment banks.
    I disagree with Vince Cable: the rot that has become capitalism cannot be reformed. The rot that has become capitalism must be chopped down and a new tree called "Real Capitalism" planted. This new treee will need tending, lest the rot infest the roots. This new tree will rest in the ground of real supply and demand, share-the-wealth with workers (in the form of company shares), regular banks that lend at reasonable rates...
    Oh, look at my little tree! Isn't it marvellous!
    Turn your face from the old capitalism and leave it to dwell in its investment banks - greed, manipulation, lies...Can you smell the rot? Turn your face away from the rot to the little tree of real capitalism.
    So perhaps it is a good thing that the business secretary wants to cast what he calls "a harsh light into the murky world of corporate behaviour." But to tell you the truth, Vince, just take a sharp ax.

  • Comment number 91.

    Cleggy: Listen Vincent I need a distraction for the debt slaves today, I am promoting the foreign aid budget in far away lands, see what you can do.

    Vincent: Easy Cowboy, leave it me old chap, I'm sure I can fob them of with some more hot air retoric. Why did our man davey boy not do it?

  • Comment number 92.

    Re:#76. Directors have several responsibilities under the Companies Act. Maximising share-holder value is not one of them.

    Directors must "promote the success of the company" as well as having regard “to the long term consequence of the decisions as well as the interests of the employees; the relationships with suppliers, customers; and the impact of the decision on community and environment; the desirability of maintaining a reputation for high standards of business conduct; and the need to act fairly as between members of the company".

    Success was defined by the old DTI (but not defined in the CA) as a "long-term increase in value". Nothing about maximising value; and value was not defined in cash terms nor was it defined in terms of value to whom.

    We need a pro-competition approach not a pro-business one. Non-competitive businesses (which include some of the big banks) should be actively discouraged.

  • Comment number 93.

    The way the bankers and hedge funds can redeem themselves is by investing long term in British based business, by governments selectively encouraging & enabling industries as the Brazilian government did with its agroculture (which moved the country from net importer to net exporter). What we still have is a number of businesses being eyed up by the US or Europe capitalising on a weak pound and these groups only too willing to sell as soon as possible to the highest bidder for short term greed.
    The guy posting here in business for 25 years, profitable with a full order book wanting to expand but yet again turned down by the banks what common sense is that! Joseph Cyril Bamford hated British banks for being short sighted we all know how big & international JCB is, where is our next JCB coming from whilst everything is for sale or it cannot get the funds to get going. Capitalism IS broken when this repeatedly happens intervention is the only solution.

  • Comment number 94.

    for Robert - if only we had more business leaders with Nelson's real vision...

    re #76 - the problem kicks in when (short-term) shareholder duty is pursued at the expense of (longer-term) fiduciary duty to clients

    In this sense, Lord Turner has a point - regulation has a role to play in aligning incentives and driving decision-making time horizons

    For those who like knocking private markets, (at least in theory) privately held companies can pursue long-term strategies without feeling the pressure of quarterly earnings...

  • Comment number 95.

    64. At 1:00pm on 22 Sep 2010, ejSwede
    Thank you brother ej. By the way anyone can attain the brotherhood. All they have to do is attain 'the knowledge'.

    Now. I am always reluctant to bash the Beeb but I have to say today while working away on my laptop I had VC's stand up routine provided by 5 live and the i-player thingy.

    Now I know Gabby Logan is not renowned for being terribly bright but when it was getting to the end of the speech she cut in and said

    'We'll leave it there, i've seen the rest of the transcript and anyway I want to talk to John Pienaar'

    Now she didn't actually say the rest of the speech was rubbish but could production managers take note and be reminded that we are capable of deciding that for ourselves. I think we've demonstated that at least on here.

  • Comment number 96.

    84. At 1:59pm on 22 Sep 2010, copperDolomite wrote:
    76. At 1:31pm on 22 Sep 2010, Lindsay_from_Hendon wrote:
    A Business Secretary should be pro-business. Fortunately, I don't see this government lasting long. At the next election, the Lib Dem vote will collapse which will usher in a Tory majority. Then the government can really focus on cutting the fat off the hand-out state.

    Brilliant!

    Think of all the additional levies we could raise from corporations who benefited disproportionately from the advances in science and engineering made by all those university-employed scientists, paid for by tax-payers over the generations.

    All those back bills will whip em into understanding the real cost of their businesses. Wouldn't that be great Lyndsay...

    *********************************************************************

    You do know that a lot of University research units are funded by 'big business' don't you? OOOOOOOh the cheek of it! University of Leeds and it's links to drugs companies via the Heart Foundation, and it's School of Geography's links to Yorkshire Water. It doesn't all come out of the Education budget you know!

  • Comment number 97.

    86. At 2:01pm on 22 Sep 2010, copperDolomite wrote:
    Mods, you have a bug in your system.
    -----------------------------------------
    We had this posting bug a few weeks ago and it seems to have re-appeared. What is going on with the BBC's web technology bods?

    Ignore what happens when you click on "Post Comment" just refresh after posting to see if it has been successful.

    I expect that there is another attempt to go live with a new bit of code and that the IT contractors in question are making a point about their soon to be rescinded non EU work permits.

  • Comment number 98.

    Are you saying if you don't think you can make money in your home you would just leave busted windows, busted pipes, not fix the heating, not decorate, just not bother?
    *******************************************************************

    Go to most streets in Leeds and there are neglected properties, either owner, tenant or landlord (owner) neglect, they are not painted, have no curtains, a tip for a garden. Perhaps you live in a very nice neighbourhood where everyone cares about their home!

  • Comment number 99.

    Vince Cable is quite right. The problem is unfettered capitalism. At the limit competition is stifled if there is no serious control and that control must come from the state.
    Examples:
    - Bus services in the UK - no local competion - local monopolies - Stagecoach and others laughing all the way to the bank.
    - Tesco maximises the number of supermarkets it can build in a locality then litters the area with Tesco Metro's etc- another local monopoly!
    - Auditing companies e.g. Price Waterhouse - there are too few of them earning huge fees. They don't audit any longer they just agree with company's Board.
    Look how much they charge to sort out companies that've gone bust e.g Lehman Bros.
    - And of course the banks - they hate competion and one thing they simply do'nt want under any circumstances is more banks of any sort!
    What about the government creating high street & investment banks structured like Waitrose - owned by it's employees - maximum salary 27 times that of the lowest paid employee? We need some lateral thinking, courage and creativity to break the mould. It can be done!
    The business community needs to be pleased by Cable's statements improved control of big business will lead to more not less business opportunities for smaller more dynamic companies.
    More control by shareholders of the companies they own would enable the crazy executive salaries/payments/pensions etc to be brought back down to earth.
    Now we just need to see what action if any Vince Cable and the coalition takes - or is it all hot air!

  • Comment number 100.

    81. At 1:41pm on 22 Sep 2010, charlie_hurley

    Did the miners sabotage their own mines because they wanted a giro?
    Did the factories and manufacturing workers close down their industries due to worker sabotage because they wanted a giro?
    Did the call-centre workers beg for their jobs to be sent abroad?
    Are the British poor to be blamed while the poor of the rest of the world innocent? How can that be? That would perhaps require some genetic analysis would it not?

    Or are we having the old story of the poor are poor because they are stupid/acoholic/drug additcted? Well, no doubt you'll have the research into those afflictions demonstrating they conditions not restricted to the poor. eg, how stupid were the economists who didn't see this coming (something like 3 dozen of the 20 000 strong profession didn't notice the bubbles!).

    It's called creating a mass of people who are completely demoralised. And if you work in the profession you claim then you will be well aware of that. If you aren't then it is time to get a new profession because those who have no understanding of the problems of the problem will never have the ability to design a solution. We've designed a workplace that will employ only the academic and discarded those who do not fit the bill.

    I've no doubt you are woking with those who are despondent, see no route out of the economy and environment they were born into, and they see no route because everywhere they turn they find a brick wall blocking the way.

    If society creates a demoralised group of people by destroying work opportunities with no or little replacement, then society has that reponsibility, not the individuals. To do otherwise smacks of blaming female victims of the most repugnant of crimes because they were wearing a short skirt!

    If really want to blame the poor for poverty then you are obliged to produce the evidence demonstrating your thesis and disproving that of Seebohm Rowntree and the many others who followed him (you could start here http://thefriend.org/article/the-making-of-modern-britain/ Remember the name, Seebohm Rowntree, a name you should already be familiar with in your business).

 

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