Capitalism has no moral dilemma

An Occupy London delegation – not everyone at St Paul’s is happy with this – is due to debate prospects for an “ethical capitalism” tonight with city fund managers, religious leaders, former bankers, and tax reformers.

Leaving aside for the moment the somewhat fantastical notion that capitalism could/should have an ethical dimension, the question is at least a million miles away from the real world.

The global contraction is undermining belated attempts by leaders of the 17 eurozone countries to agree on a new treaty which would supersede national sovereignty. Pushed, prodded, warned and threatened by the credit rating agencies acting as the voice of capitalist finance, plans for further assaults on living standards are to be co-ordinated and enforced at supranational level. They call it “fiscal union”. Germany’s chancellor, Angela Merkel believes it will take years to achieve.

China’s manufacturing output is contracting, undermining those who asserted that the country would drag the rest of the world economy out of recession, while Britain’s has nosedived; and Brazil’s economy has gone into decline.

The democratically-elected governments of Greece and Italy have already been pushed aside by administrations by the bankers for the bankers. Alongside the feverish political activity, central banks in the eurozone are following the Bank of England, making their survival-of-the-fittest plans for when the first of the commercial banks fail.

There is no precedence for the scale of this crisis. References to the 1930s abound but the so far slow-motion crash of 2011 is surely beyond comparison. Look to Ireland. The people there were amongst the first to feel the consequences of the ending of the long credit-fuelled boom as its property frenzy ended with the collapse of the Anglo-Irish bank in 2007/8.

The measures taken to pay off the punitive cost of bail-out funds from the EU-ECB-IMF Troika, and bring about a “return to growth” have meant an astonishing economic contraction and a reduction in real incomes. Real national output has contracted by 12.5%, but that conceals a bigger slump in the day-to-day economy. Nominal gross national product (GNP) has fallen by 22%. Consumer demand is down a third. Unemployment at 14.3 per cent is misleadingly low - with no work to be had many young people have emigrated – some to work on the tar sands of Alberta.

It is already a deeper depression than the 1930s. Public sector pay has already been cut 14% on average (with a pension levy), rising to 30% for the top managers. Entry-level jobs for graduates at the big four accounting firms have dropped by a third to €21,000. Office rental costs in Dublin have halved, and house prices are down 53%.

In common with the other 16 countries, membership of the eurozone meant that a currency devaluation to improve its export potential wasn’t possible. So Ireland was forced into an internal devaluation of the cost of labour, slashing wages, salaries, pensions and public sector spending.

The second wave of the global crisis is now underway with a vengeance. As the economies of Greece, Italy, Spain and Portugal disintegrate, Ireland’s people will be in the firing line again. The Fine Gael/Labour coalition is already slashing deeper into living standards.

As a concept, “ethical capitalism” is more about theology than political economy. The bottom line is necessarily the primary concern of an economic system based on profit which in turn demands continuous growth. This is how the Protestant ethic works out in practice in present-day society.

In the end, a moral shift here or there can make no difference to dealing with a profound, historic and fundamental crisis of the system of production itself. The pressing debate to be held within the occupation and strike movements is on developing not-for-profit sustainable alternatives and how we get from A to B.

Gerry Gold

Economics editor