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Saturday, 21 January 2012

Profit is a Human Right?

The news today is rather full of the group of American Hedge Funds investors who are suing the EU or the European Central Bank in the European Court claiming that the "rescue package" thrashed out for Greece, Italy, Spain and Porugal - among others - infringes their human right to maximise their profits. The reason is that the banks, presumably in which they have invested - are required, in the settlement, to carry 50% of the unsecured debts, the taxpayers of the EU are picking up the rest.

According to the litigants, this reduces their profits and thus infringes their "right" to destroy national economies and cause untold suffering in pursuit of their profits. The "greed is good" creed, it seems, overrides all other considerations. The fact is that this maximum profit concept arises from a US Supreme Court decision in the 1930s. Henry Ford wanted to slash the cost of his cars in order to make them more widely available. To do so he had to cut the company profit margins and thus reduce the dividends paid to his shareholders. Several, some on his Board of Directors, promptly sued him. The court ruled for the litigants, declaring that the sole purpose of any corporation was to maximise the profits to be shared by its shareholders ...

That decision has set the tone of "capitalism" ever since. Employees are no more than costs in the balance sheets, to be discarded when they become unprofitable, and paid as little as legally possible at all others. Only the respective "boards" and their senior managers actually enjoy any real prospect of reward, and the shareholders do no more than put their money into shares - often for very short periods - yet expect their investment to earn the highest possible return at the expense of those actually working for the company.

Now that sounds as if I'm arguing the socialist cause, but I'm not. I do recognise that many of these "hedge funds" are investing money on behalf of folk like me, who draw a pension paid, hopefully, from the income from investments. A reduction in the return on that investment affects the ability to continue to pay me. But there has to be a balance. A link recently sent me by the Postulant flagged up a serious abuse arising out of this "profit maximising" activity. According to a recent survey, executive pay in all the major supermarket chains is sky high. So are the profits shared with the shareholders. What's wrong with that, you may well ask.

Just this, three of the largest are paying their full time staff, packing shelves, manning tills and doing the "shop front" jobs, less than is necessary to live in the cities they work in. In London alone, the majority of these workers are also drawing Labour's "Working Credits" - a benefit intended to help the unemployed switch back into full time work without their incomes falling below what they were receiving in benefits. It seems that the Boards of the supermarkets saw a fabulous way to maximise their profit margins at the expense of the taxpayer. After all, why pay a worker more than you have to if the same worker can pick up a 'benefit' that tops up their pay. Secondly, by giving them minimum working hours, the same person can take on a second job. Winner for the Board - bonuses for the executive and maximum profit for the shareholders ...

I am a lifelong believer in minimal regulation and freedom to choose how, where and what I do with my life. Socialism is anathema to me, since in practice it empowers a very few, and pigeon holes and restricts everyone else. But the present face of Capitalism has to change, it has to be made more responsible and it has to ensure that those who generate the wealth for the shareholders, directors and executives get a fairer share of the cake.

Unfortunately, I can't see it happening without some pain. All I can hope for at the moment is that the Court will reject this present claim and case. The banks maximised their profits and are still playing havoc with peoples' lives and nations economies. They gamble on everything, from food and fuel, and currencies. They think nothing of speculating on things that are a matter of life and death to a majority, but only another source of profit to the trader. They have been bailed out, not just in Europe, but in the US as well, by the taxpayer. They still insist on paying obscene "bonuses" to the people who think nothing of destroying national economies by speculating against a currency, or forcing food and fuel prices through the roof speculating on reserves and stocks in transit. (How many people know that each tanker loaded with oil leaves its port of origin with only a 'concept' destination and that the cargo can change ownership four or five times during a voyage?)

Now, as Frau Merkel has said, it's time they showed some responsibility. It's payback time.

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