Alf Young: When big business goes off the scale

Published on 18/08/2012 01:44

The mess created by a partly free, partly state-controlled market is too much for the giants of capitalism, writes Alf Young

THE “humiliating shambles”, their words, not mine, of global security group G4S’s failure to fulfil the terms of its contract at the London Olympics and the shaming of two more UK-headquartered banks – HSBC, over laundering Mexican drug money; Standard Chartered, over doing the same with Iranian oil revenues – has served to reignite a long standing political controversy.

What, on the one hand, are the appropriate limits to the powers and responsibilities of the state and its agencies? And what, if any, should be the boundaries within which market-driven behaviour is free to operate? In other words, is there an answer every society can agree on to the question: What Money Can’t Buy, the title of the latest book by Michael Sandel, Harvard professor and the BBC’s 2009 Reith lecturer.

Among the surprising things that now each have their price, Sandel tells us from his side of the Atlantic, are a prison cell upgrade in some Californian jails ($82, or £51, a night); the right to a green card and permanent residency in the United States if a foreigner invests $50,000 and creates at least ten jobs in an area of high unemployment; and $15 to $20 an hour for standing in line overnight on Washington’s Capitol Hill for lobbyists who want to attend a particular congressional hearing.

In these bewildering times, where taxpayers over here own large slices of some banks and some state schools and NHS hospitals in England are being encouraged to make a profit, there are still a few people around who think the proper balance between state control and free markets is crystal clear. A few who cling, without a whiff of equivocation, to the dictum “public bad, private good”. A few others who believe, again with not even a scintilla of doubt, in its converse.

An example of the former is Telegraph columnist, Janet Daley, who last month absolved capitalism of any responsibility for either the G4S shambles, or the latest banking scandals. Anyone who thinks otherwise is slapped down by Daley for indulging in “egregious moral hokum”. In another recent column, she tells us the Olympics won her round because they were “an unapologetic festival of competitiveness”.

She obviously missed that other Olympics festival, its festival of volunteering – 70,000 strong – which, by common consent, helped make these Games so special for athletes and visitors alike. But she won’t have missed defence secretary Philip Hammond’s admission, in Tuesday’s Independent, that the kind of “lean commercial model” typified by G4S isn’t always appropriate when it comes to delivering more complex public objectives, like deploying a warship.

At the extremes of this debate there is no place for such revisionism. Strictly black and white thinking prevails. Daley is already on record pondering what she calls “the abiding mystery” about David Cameron. “What does he stand for?” she keeps asking. Hammond now risks being accused of catching his leader’s disease, a lack of “passionate conviction”.

However, for the vast majority of us, trying to make sense of the messy middle where public and private co-exist, feed off each other and sometimes collide, the bigger issue, by far, is how to cope with the everyday consequences of ideological posturing. Take what has happened to our railways for the past couple of decades, under both the Tories and New Labour. As we saw again this week, at a time when rail travel is increasingly popular again, government continues to sanction inflation-busting fare increases every time we take the train.

It’s part of the price we all pay for the way John Major’s Tories privatised British Rail in 1993. Tony Blair’s Labour Party responded to the collapse of the infrastructure part of the resultant jigsaw, Railtrack, by creating Network Rail, a curious animal, nominally private but owned by no-one, still dependent on the state for underwriting its investment programme.

Then, when two private players in quick succession couldn’t make money out of the east coast mainline, they handed it back early. Until the end of 2013, when another attempt will be made to find a private sector operator for the route, it will be run by East Coast Trains, effectively a renationalised business. Now, with the heavily indebted First Group taking over the Virgin franchise on the west coast mainline from this December, on the back of what many see as fanciful projections of passenger growth, we must all hope the east coast saga doesn’t repeat itself on the Glasgow to London line.

Three companies own and lease the bulk of the rolling stock we all travel in to all the other privately-owned train operating companies. All three made money for the management teams that first bought them from the state. But they quickly cashed in. One was owned by Royal Bank for a while, but had to be sold again, while the bank was being effectively nationalised after the banking crash. Another is part-owned by Lloyds, which currently has the taxpayer as its largest shareholder.

It’s another unholy mess. Tory minister, Chris Grayling, admitted as much in 2006. But the problem isn’t simply who owns what or who profits from what. To my mind there’s another less visible, but increasingly onerous problem. Simply put, are some of the largest, most complex structures that increasingly dominate our lives simply too big to be responsibly governed, regardless of where they sit in the public/ private landscape?

Heath reformers on the right are fond of pointing out that the NHS is as big, if not bigger, in manpower terms, than the Chinese Red Army. But look at G4S. It employs some 657,000 people worldwide. Yes the London Olympics went off with scarce a hitch. But the Games were with us for just a couple of weeks. Could anyone run such a thing were it designed to be a permanent feature of our lives?

It doesn’t take much of a change in scale for things to start going wrong. For the past four years in my village, the shop across the road, a combination of post office, general store, newsagents and butchers, was run by two hard-working brothers who knew everyone’s name and went out of their way to source things like electric bulbs with odd fittings for their older customers.

Then they got an offer they couldn’t refuse from the Co-op, which has a strategy of building mini-supermarket capacity in communities like ours. It has planning permission to expand on the site. Hardeep and Bob left one Friday, to a lot of tears and hugs. The Co-op may have mutual roots. But it made no attempt to tell anyone in the village about what would happen next. No leaflets through doors. No explanatory notice in the window.

The shop and the post office shut abruptly, as the builders moved in. Some ten days later it reopened with ever changing, imported staff. Under the brothers, the morning rolls were there before seven in the morning. Now they sometimes don’t arrive until after ten. People are unhappy. Rumour has it the shop isn’t doing very well. If that can happen in one small shop in a corner of Stirlingshire, is it any wonder a bank as vast as the Royal implodes or G4S turns in a shambolic Olympics performance?