Mervyn King didn't mince his words in his Daily Telegraph interview on the banks this weekend. Not only were people right to be angry at those who had caused the mess that we were now all involved in cleaning up, said the governor of the Bank of England: the finance houses also put “too much weight ... on the importance and value of takeovers”, thinking it entirely legitimate to pile up their own short-term profits by destroying good companies in manufacturing and elsewhere; much financial innovation was a zero-sum gain, ie transferring value, not creating it; and, he added, since Big Bang in the late 1980s too many in the City thought “if it’s possible to make money out of gullible or unsuspecting customers, particularly institutional customers, that is perfectly acceptable”.
The response of anyone with a bank account will be, so what else is new? We've known for years that they've been ripping us off with sneaky overdraft charges and exorbitant interest rates. But the banks' outraged response to the governor's remarks shows that they have learned nothing. When both the sherriff (Lord Turner, the current regulator) and the US marshall (King, the next one) are saying that the days of the great free-for-all are over, it's time for the cattle barons to accept the inevitable. The music's stopped, the saloon is closed and there's no one left to dance with. The show's moved on to another town.
This really is an inflection point. King's interview is an epitaph for a whole way of doing business – not just for the banks but for all the firms that are guilty of the same customer-cherating tricks: inflating costs, deflating quality, building in obsolescence, ignoring the claims of the planet, all for the sake of a few extra pounds of short-term profit.
For 50 years in the middle of the 20th century – from say 1930 to 1980 – it was possible for a chief executive to say, and be taken seriously: 'What's good for General Motors is good for America'. Big companies provided good jobs, material living standards soared and the damage to the planet could be ignored. But since then the returns fo business as usual have become vanishingly small. None of the previous justifications apply. Good jobs have been sent abroad, living standards haven't budged, at least for the vast majority – and the environment is twisted with pain at the poisons poured into it and the goodness sucked out. The reverse proposition has become true: what's 'good' for General Motors (or the banks, or the telcos) is bad for America.
Actually, it's not even good for General Motors. As we've noted before, the last people to take advice from about what's good for capitalism is capitalists. In a thoughtful blog at HBR, Justin Fox (always worth reading), asks 'Just What Does it Mean to be Anti-Business?' His starting point was an FT interview in which George Buckley, CEO of 3M, slammed Barack Obama as 'Robin-Hood-esque' and 'anti-business'. 'There is a sense among companies that this is a difficult place to do business,' he complained. 'It is about regulation, taxation, seemingly anti-business policies in Washington, attitudes towards science.'
It's hard to know where to start with this. Only someone insulated from the world inhabited by the rest of us could have failed to notice that Robin Hood was a hero; wasn't it the rich and powerful, in the shape of the Sherriff of Nottingham, who were the villains? Much later, it wasn't Henry Ford's altruism that led him to double his workers' wages. It was the calculation that if he did they'd actually be able to buy the products his assembly lines were churning out. As Fox gently points out, after three decades of soaring inequality, a bit of Robin Hood (or Henry Ford) might again be a good thing – it might be in the interests of business, too.
Nor, as he notes, is regulation necessarily anti-business, although the two are now lazily conflated. After all, the all-time best decade for US business was the 1960s, perhaps the height of the era of the regulatory state. 'It was hard to label this rise of government as "anti-business,"' points out Fox, 'since corporate profits grew and grew, too'.
Some observers are now beginning to draw a direct analogy between Western big business and the cynical kleptocracies of the Middle East. Of course, in the West it has all been perfectly legal, sanctioned by the academy and encouraged by government – yet the capture of the institutions of business by an unholy oligopoly of shareholders and managers is just as complete as in the Arab world. Hence the movements now gaining ground here, similarly determined to say enough is enough. But it's now not just UK (and US) Uncut, the campaign for the Robin Hood tax, citizen's capitalism and others who are on the march – the governor of the Bank of England, the chairman of the FSA and Harvard Business Review, the businessman's bible, are on the same side, at least in spirit. High and low, the realisation is dawning: we don't care about Davos, we don't want business deciding how to run hospitals, schools, universities or libraries – we're not actually very keen on business running finance, come to that. Business isn't the answer any more, it's the problem!
We could surmise that the intellectual battle having been won, the cycle will take its course and the pendulum inevitably swing back towards the regulatory state. But for the moment the zombies refuse to die and vested interests are strong, particularly in the US, where the hard right seems determined to perpetuate the reign of the rich and ignorant – and may have the political muscle to do so.
In which case, the parallels with the Middle East may become a lot closer and more dangerous.