AN IDIOT'S GUIDE TO FINANCE.

Just a few thoughts on what seems to be a pretty disastrous way of running a planet.

Reduced to its simplest, capitalism, the economic system under which most people on planet Earth live, involves those with wealth investing that wealth in nice new ventures in the hope of making a killing.

I remember being a schoolboy learning about the railways boom of the nineteenth century. Men with money saw that building railway lines to go from, say point A to point B quickly and without fuss but with plenty of smoke, might lead to those railways being used by so many businesses and individuals that their initial investment would be returned to them in nice fat dividends times many.

This seemed like a good idea, but it did lead to a few people losing their investments because railway lines were occasionally put where railway lines weren’t needed. There was a risk inherent in building railways that made the whole thing only fair. Investing in something that is going to reward an already fat cat ought to be a risky business. There ought be a balance with lose on one side and win on the other. It’s always nice to see fat cats being forced to slim down a bit. Comforting, you might say.

So we have the formula: risk leading to either win or lose. Of course, it was mostly win because who with a brain cell is going to invest in a harebrained scheme involving miles and miles of track being laid and expensive engines bought when they’re going nowhere of any importance and nobody will want to use them? Such an error of judgement didn’t make sense then and doesn’t now. But it did, occasionally, happen.

What I want to emphasise is the risk element, though, and there have been loads of high profile losers in the game of capital investment, like the South Sea Bubble. That was an investment in trading in South American markets, and because there was a great deal of profit to be made (gold and silver and so on) a man could invest a shilling, let’s say as a for example, and sell that investment on for a pound in no time at all, thus making a huge profit. And it could be sold on next day/week/month for even more. The thing became a bubble, and bubbles almost always pop, and eventually that original shilling stake was worth the sort of fortune that had no basis in the real world, and those who bought the shares at their height saw their value plummet as reality set in. That’s sort of what happened, at its simplest level. So people investing their wealth lost it as the bubble popped, and consequently a few jumped out of high windows in order to plummet to the next world in a fit of grief and poverty.

Since then men with capital have got to be canny. They have found a way of removing the risk element out of the money game by arranging for public finances to make the initial investment, then when everything’s working sweet and profitable, buy it for themselves. This has happened in the UK, and just about everything worth having has been sold to wealthy individuals and groups, particularly if they see a profit in it.

The nett result of this is every man, woman and child who needs to use the utilities that were originally financed and actually owned by them, find themselves paying a bit more for those same utilities so that men (and women) of capital can own castles. So all the important and essential utilities, being in private hands, become increasingly more expensive and the big lie, the one that was told when they were sold off, that private enterprise is bound to be much better than public bodies when it comes to running things, is seen by all to be the huge lie that it was.

There are one or two amusing off-shoots of this, one of them being that some of the castle-owners can’t really run a utility due to personal inexperience/ignorance, and have to employ someone who can, and in order to do that they pay that clever someone a disproportionately high salary and give him a highfaluting job title because it’s important that everything runs smoothly and, as I mooted, they haven’t a clue how to do that themselves. Give an expert enough cash to keep him hanging around and you’re on to a winner. But, ironically, sometimes it’s not that highly paid executive who really has the know-how but a laddie way down the ladder who actually gets the job done, quietly and in a cupboard somewhere. You see, there’s the suggestion of waste there. And waste costs. But that doesn’t matter one jot because we all share in that waste when we pay our bills. Utility bills? Don’t you love ‘em?

For a smidgen in time there has been the perfect, democratic, and ultimately fair economic system in most countries, but human nature being what it is and cash being the incentive it’s supposed to be, it’s given way to the distorted version of capitalism we have today, in which risk isn’t really there and the only way a castle-owner can fail is by playing too much golf and taking his eye off more than the golf-ball. Or by being an incompetent idiot. Or, and I suppose this is most likely, being a great deal too greedy. Fat cat salaries? They’re greedy and at the same time been at the head of most high-profile collapses that have rocked the financial world.

But collapses don’t matter because there’s always the public’ purse that can pick up the tab when the fat cat can’t. Good for us!

Next in line in the UK is likely to be health. They’ve already sold some of it to castle owners. Here’s a prediction: the rest will surely follow, and then what chance of a hip replacement or new heart valve when you want one? And at what price?

© Peter Rogerson 08.06.18