Capitalism is bankrupt.

Alex Michie (UK, AC 06-08)

Alex Michie, a very recent Atlantic College graduate, is currently working for Muto think tank ( and has written the following article on the British political and economic situation from his work experience.

Capitalism is bankrupt.
In both moral and financial terms capitalism is, quite literally, bankrupt. Previous worshipers and priests of this onetime supposed flawless system are now queuing up to criticise and berate it. The unthinkable has happened. The conservative party, the heirs of Margaret Thatcher’s neo-liberal throne, are attacking bankers, calling for salary caps, and most radically of all, endorsing public ownership. But Britain is not alone in this bloodless revolution. Reagan’s heirs are doing the same thing on the other side of the Atlantic. One leading American economist said the only chance the USA had left was something that “looks, smells, tastes likes, but will never be called, socialism.” Europe, their onetime schadenfeude now in tatters, is hailing Gordon Brown a superman for his nationalisation bail out. Regardless of whether Thatcher is to be buried in Windsor or a in a coal mine, she is soon to be spinning.

For years, as we watched millions made unemployed whilst the rich got unimaginably richer, we were told “There is no alternative”. Thatcher said it, Major repeated it, Blair span it, and Brown mumbled it. They all used their time in power to peel back regulation and public ownership, and only now are we reaping the consequences. But no matter who said There Is No Alternative, they were wrong.

Were they ignoring or simply unaware of the economic miracle that socialist China was creating through an alternative to Anglo-American capitalism? Surely they knew of the alternative posed by Cuba, the country that manages to rank forty-three places higher in the HDI index than in GDP rankings. In fact, despite being blocked by the world’s largest economy, and having just one thirtieth of their GDP, Cuba enjoys more leisure time and the same life expectancy as the USA. Like or loathe these examples, they are unquestionably alternatives.

But all this while, a much more viable, practical alternative was staring us in the face. One that operates within the boundaries of laissez faire Britain and USA, and that dates back to before the Industrial Revolution or Adam Smith and his invisible hand.

The current collapse of the financial sector has gone hand in hand with the implosion of our biggest banks. It seems that nobody in the financial sector, however aggressive or cautious their policies, was left unscathed. This is untrue. There have been a minority of financial institutions which managed to weather the storm, and did not resort to using public money to pay their executive bonuses: The Cooperative Bank, Nationwide Building Society, Britannia Building Society and the rest. These banks and building societies have a common theme: mutuality.

Instead of being owned by remote (normally hugely wealthy) shareholders, these companies are owned by their members, or to put it another way, their customers. So instead of practicing aggressive, short-sighted and unethical policies in order to make short-term profits to pay large dividends to their shareholders and, in doing so, receive ridiculous bonuses as a result, these institutions protected their members interests, and their members did not want short term payouts but their money to be held in a safe place and invested wisely and ethically. Consequently, these banks survived.

Mutuality, however, is not only alive in the financial sector, but operates throughout the UK’s economy. From the Cooperative supermarkets, to travel agents, to pharmacies, to leisure centres, and even schools and Doctor Clinics, mutuality is alive and kicking. Let’s keep it that way.



– United World College Student Magazine –


2 thoughts on “Capitalism is bankrupt.

  1. Alex,
    I agree with you that cooperative organisations are great, but they are not the complete answer. They tend to be too small and insufficiently dynamic. Capitalism is not dead, but it does need reinventing.
    Managers can have too much power in modern capitalism. They have too short a time horizon and often do not look at the long term health of the organisations they manage, which is why executives in financial institutions were willing to take on risks that threatened the very survival of those organisations.
    Shareholders need to take back control and focus on the long term health of their corporations. Directors and auditors need to take more active roles, truly representing the shareholders who appoint them.
    Marx may eventually be proven right about the transitory nature of capitalism, but I fancy that capitalism is bloody but unbowed.
    Warm regards from Duino,

  2. Nice to hear from you Malcolm, I trust all is well in Italy – at least better than the solid rain we’ve had here for the last few weeks.

    I heartily disagree with you that cooperatives are too small and lack dynamism. The work I’m doing at the moment counters that argument. Unfortunately, I’m not allowed to spill the specific beans until December 4th, but the cooperative and mutual sector in the UK is far bigger than people realise, with turnover per annum well into the tens of billions and employee numbers well into the hundreds of thousands.

    Cooperatives and mutual on a large scale can and do work. One of the largest insurance companies in the world Zenkyoren with a turnover of $47 billion a year is a mutual. Close to home, the Coop group is one of the most successful and diverse enterprises in the UK with turnover of $13 billion a year.
    In terms of dynamism, the recipient of this years mortgage provider year was a comparitively tiny company called furness building society. No private company on that scale could possibly compete, but due to the dynamism that mutuallity allows, furness punches way above its weight. Similarly this years general insurer of the year was NFU Mutual and life insurer of the year was Wesleyan Group.

    I think whilst Marx was wrong about his projection of a market controlled soley by the state, he was certainly right about the transitionary nature of capitalism. Whilst it’s not yet in its death throws, it’s certainly getting there. Mutual businesses exposes capitalism weaknesses. Like you say managers with too much power have a short term horizon, which is not condusive to a healthy economy. Shareholders are not the answer to that. They don’t seek long term, progressive goals, but short term maximised dividends that in turn maximises share prices, which they can then sell to make a quick buck. Employeees are encourage to increse these dividends by short term methods if necessary (see the overly complex, money making financial instruments dreamed up by bankers seeking bonuses).

    Capitalism may be bloody but unbowed, but it’s just going to get bloodier.

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