The collapse of privatization behemoth, Carillion, could become the straw that broke the neoliberal camel's back. Carillion has shown that the transfer of risk from the public sector to the private sector is a farce for, when PPP or public-private participation projects fail, the private partner often goes down leaving the risk and loss with the public partner, the government and, through it, the public.
Now it's the Royal Bank of Scotland in the spotlight. RBS made itself a big player in the subprime mortgage fiasco and got caught in the collapse. It's what happened afterward that has critics up in arms.
Up to its neck in sub-prime mortgage lending in the US, it was a major figure in the 2007 financial crash, during which its toxic balance sheet was found to be larger than the GDP of the entire UK.
Then, after RBS had been bailed out with taxpayers' money, it continued to give capitalism a bad rep, ruthlessly exploiting the small businesses who were suffering from the post-crash recession it had helped create. This was confirmed last week in a revealing internal RBS memo from 2009 which urged managers to let struggling small businesses “hang themselves” so that the bank could pick up their assets at rock bottom. The now notorious RBS Global Restructuring Group was condemned in the Commons last week for “the largest theft anywhere”, and for ruining thousands of viable companies.
No-one should be surprised at this. It is how business has learned to behave in the era of what some have called “turbo-capitalism” – the unregulated, low-tax, bandit capitalism of the last 35 years. A succession of scandals – the Panama Papers, the Paradise Papers, PPI, endowment mortgages, private pensions – has fatally undermined capitalism’s moral claim to be the fairest and most efficient economic system. But the very visibility of these fraudulent activities now constitutes a real and present danger to the future of the capitalist system as we know it.
Take the privatisation mega-corp, Carillion, which was also heavily involved in PFI and has been one of the leading agents in the “outsourcing” of public services. It has now gone bust putting at risk the welfare of some 40,000 dependent businesses and their employees. Effectively an arm of the state, Carillion represented the most blatant form of toxic collusion between Government and the private sector. The managers of Carillion, who paid themselves inflated salaries and bonuses even when the company was effectively bust, were just doing what comes naturally. Money is its own justification. Most have salted away their fortunes, and moved on – but the public, who paid the price, have not.
Some entrepreneurs are arguably wealth creators. For the two centuries following the Industrial Revolution, capitalism was the most innovative and productive economic system in human history, as Karl Marx observed. Even today, capitalists like Elon Musk of Tesla or the late Steve Jobs of Apple, bring great products to market, though in both cases they were heavily underpinned by direct and indirect public investment. But the people manipulating Libor rates in the City, setting up hedge funds, selling sub-prime mortgages, running PFI schemes etc are simply parasites. Britain's managerial class today is about as entrepreneurial as Homer Simpson. They're mostly dull-witted accountants who've sat on their bottoms for 20 years.
In the 19th century, plutocrats could protect their wealth behind laws largely drawn up for the benefit of the wealthy. The poor had no lawyers. But today the poor have the vote, and lawyers, and there is no way this kind of structural inequality can survive in the 21st century, short of the extinction of popular democracy. Eventually, people will vote for change: for a society in which wealth is spread more equitably, and in which public services are run in the interest of the people who pay for them.
And soon it will be Canada's turn. With Morneau at his side, Trudeau plans an enormous, badly needed and overdue infrastructure mega-programme and, just like the Brits, he wants to put it on the "never, never" - public-private participation. It's the perfect alternative to having to tax the rich and dormant, accumulated wealth.
We've seen what happened when the Brits privatized Brit Rail, the Post Office, and all manner of once "public" utilities. We've seen that visionless governments are suckers for predatory privatization and neoliberal fraud. We've seen how prime minister "cash for access" has dealt with KPMG and the Isle of Man scofflaws, the Panama Papers and the Paradise Papers scandals. We've heard his message of globalism consigning our kids and theirs to a lifetime of "job churn."
Trudeau is a master of the homespun image but like so much about him it's all carefully crafted bullshit.