Wednesday 1 February 2012

Baby steps towards responsible capitalism?

The past week has seen Sir Fred Goodwin lose his knighthood and RBS chief executive Stephen Hester surrender his £973,000 bonus. Headline grabbing events by their very nature, questions are now being raised as to whether we are witnessing the first steps towards responsible capitalism or symbolic gestures merely equating to the public being thrown a bone?

First rearing its head at the embryonic stage back at Labour’s party conference, the “responsible capitalism” agenda is one which seems to be sticking. Once again, much like 2011’s “squeezed-middle”, opportunistic Tories, recognising the resonance the issue has with the public, have leapt aboard the bandwagon. With this, a movement has pushed the agenda into the public consciousness. But perhaps it has only been in the past week when the concept has become a reality.

Spurred on by Sir Philip Hampton’s rejection of his £1.4 million bonus, on Monday Stephen Hester, RBS chief executive, caved into growing political pressure when faced with the possibility of a Commons vote and yesterday, with a frightfully cold evening looming, news outlets across the nation switched focus to Fred Goodwin’s “de-knighting”.

From an optimist’s perspective, one could argue that these are much more than empty gestures. Perhaps, The rebirth of accountability. And, with defiance towards unjustifiable bonuses and rewards taking their first scalps, you cannot help but think a precedent has been set for other CEOs, chairmen and executives to follow. But to be positively bleak, do we live in times of optimism?

With growth stagnating, unemployment at its highest rate since 1996, welfare reform threatening many of the most vulnerable in our society, this is hardly the time to count the odd million saved or a knight of the realm forfeiting an honour as wins. To take the less joyous path and reluctantly embrace pessimism, these somewhat positive events do not seem so significant in the cold light of day.

When it comes to real reform, where the agenda of responsible capitalism will ultimately succeed or fail, we will see whether there is real merit to the argument. Despite the term’s popularisation, in reality we find a contrasting picture. No truer than with regards to the Vickers Report, which advocated much needed regulatory reforms of banking. In December, this was tellingly confirmed to be off the table until the latter end of the decade, inexplicably being scheduled for 2019. In both a political and banking sense this is light-years away. And in all honesty, who knows what the future will bring? By 2019, the economy could be growing and the yesteryears of turmoil could be long forgotten, only for future generations to once again be blighted by further recessions.

With this in mind, in spite of the fanfare surrounding “responsible capitalism”, you cannot shake the feeling that far too many remain proponents of the notion that big business is impossible to regulate. Jonathan Bartley, writing last week for the Guardian, suggested that “responsible capitalism” is an oxymoron much like “well-mannered war”. While, this may be too cynical, there is a point here. A point perfectly articulated by gestures such as those seen in the past few days. Responsible capitalism has to mean more than simple pact mentality retribution and bonus blocking, to put it simply the idea must avoid being devalued, avoid becoming “responsible capitalism lite”.

To steer clear of such a fortune, we must be wary of finding ourselves in a rut, or continuous chain of events, where every now and again the public mood is defused with a token appeasement. Rather pressure must keep mounting, focus must not waiver and courage must form the basis of our approach.

Unquestionably, Ed Miliband has seized the initiative in the past week, and doubters must surely recognise the Labour leader’s growing ability to pick the fights worth fighting. As with Murdoch and NewsCorp, Ed has understood the public mood and capitalised to appear both earnest and true on his words concerning responsible capitalism.

The party must continue to walk this path. While, the much needed reform is scheduled for long into the political future, a future in which Labour hopefully once again form a majority, Labour and the left can still be influencing the debate now. Pushing a coherent agenda clearly defined by its goals and undeterred by nonsensical claims of angering big business. The message is clear, the public want action, Labour can and must deliver this.

This is a guest post by Kenneth Way

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