Saturday 7 January 2012

Milliband attacks the economy, again

Here we are, early in 2012 and already the Labour party leader is attacking business and trying to destroy the economy. The sheer ignorance of business, rationality and capitalism is breathtaking.
In a weird article in the Graundiad Mr Milliband lays out his insane agenda. He wants more 'responsible capitalism' what this amounts to seems to be an attack on executive pay.

This is so short-sighted. Already the City itself has done a good job of undermining the public equity markets. IPO's like Ocado last year that are priced to fail and succeed only in making investment bankers and the proprietors rich are limiting the amount of companies coming to market. Huge market volatility is causing smaller AIM companies to delist at a very fast spreed. Volumes are falling - the Equity markets are shrinking.

Add to this a crazy idea about comparing pay and limit pay and wealth creators are going to ask why go public at all? With all the hassle and effort only to have your own pay limited anyway. Instead these companies will stay private where the Government cannot yet touch them. There is plenty of private equity money around today to fund private companies.

But this is terrible for our society. Pensions and Savers - who still outnumber debtors by some way, rely on public companies for their investments and yield. Private companies pay no dividends to retail or institutional investors. So by shrinking the markets we are reducing the potential for our savings to help fund our future and our investments and growth.

I am all for fixing the current mess in our financial system which as we all know is at crisis proportions - but having idiotic, populist, socialist politicians who have never had a job in their lives pontificate and lead the debate is a very sad state of affairs to be in. Let's hope the Coalition roasts them for this nonsense.


Anonymous said...

Millibands utterly ineptitude is good for me.

Whilst still feeling abject horror at the legacy of the last Labour government, and appreciating how shit the tories are, he is really hammering nails into the coffin of the Labour Party....

Y Ddraig Goch said...

CU, while I agree that Milliband is an idiot, I don't think you have properly grasped the issue with executive pay. I'm not surprised, since the left always frames that debate in terms of "fairness" - which is lunacy because life in general is unfair, see for example Polly Toynbee's over-funded and unproductive lifestyle. No, The real problem with the current extravagant level of executive pay is that it is economically inefficient and ineffective. It lavishly rewards widespread mediocrity and a fair amount of straight out incompetence. You highlight the importance of equity markets yet executive pay has risen far, far, far faster than any measure of value generated in the businesses involved.

As you say, Milliband is an idiot, but a competent leader would be planning to permanently shackle executive pay to the creation of enduring shareholder value.

Anonymous said...

Pension funds etc have been steered away from equity investment to bonds due to the bizarre 'mark to market' accounting requirements. Of course this has suited HMG very well as its increased the demand for gilts and a time when NuLabour allowed public debt to spiral out of control

Clown pretty much destroyed UK pensions in a decade.

Y Ddraig Goch - IMHO is the business' owners who need to be tackling absurd CxO compensation, even after running the business into the ground (e.g. Manny and Thomas Cook)

Budgie said...

Y Ddraig Goch and Anon 6:27pm - very perceptive comments.

We now have 50% GDP spent by the government and 50% by the "private" sector. Are we a capitalist country or socialist? Neither, we are corporatist.

Those at the top circulate between politics, quangos, government departments and businesses. We have seen what a mess these people have made recently. But none are held to account. This leads to an incestuous group that imagine they deserve it all (as in the USSR).

They look out for each other out. They employ each other. There is in essence no properly functioning market for their jobs. Hence the spiralling pay for all of them - LG chiefs, CG bureacrats, CEOs and bonused execs.

Accountability and a fluid market must be restored/created.

CityUnslicker said...

Fine comments all, I don't doubt the difficulties of exeutive pay and the over-rewards. As it happens many FTSE CEO's are not that vastly overpaid, earning £2 million odd for running multibillion profit producing companies does not bother me; hedgies earn £20 million a year for managing a single £5 billion fund.

Budgie thought i utterly agree with the corporatist message, this is the true blend of Eurosocialism that we have arrived at - large companies protected with new rules and bailed out, whilst those seeking to grow are held back.

Anonymous said...

@Budgie, the blurring of roles of state authorities, political parties, corporatist arrangements and the media was examined in Crouch's book "The strange non-death of neoliberalism'. It's far better read than the title suggests!

Phil said...

Budgie has it. From the POV of the rest of the population it's not so much the disparity in pay levels that grates as the complete lack of accountability. Run a company into the ground as a CEO? Get a golden parachute (agreed to by a supine board of mutual back-scratching non-execs) and in a year or two another appointment to a new company (where if it succeeds you'll reap £££££ and if it fails you'll still walk away with ££). In the meantime you can fall back on your own set of non-exec posts for income, where you can scratch the back of all those who've scratched yours in the past.

tory boys never grow up said...

It's dreadful all these extremists trying to limit executive pay and tax avoidance. Why even the Prime Spinner is starting to agree with them!

Elby the Beserk said...

I'm more worried about excessive pay in the public sector and the in built system of reward for failure there. One of the people responsible for the Mid-Staffs Morgue scandal left with a seven figure pay-off, and is now a top bod in the (so-called) Care Quality Commission - this despite having shown that she is entirely unfitted to have any dealings with the care of others.

Or the chief of Kent CC who after some 18 months in the job has left with an enormous pay-off.