Cooking the Books: Who does capitalism work for? (2026)

The Cooking The Books column from the May 2026 issue of the Socialist Standard

‘AI risks widening inequality, warns Fink’ was the headline in the Times (24 March) reporting on the annual letter from billionaire Larry Fink to the shareholders of his asset management company BlackRock. The caption under a photo of Fink read:

‘Larry Fink said that most people who work for an income would be left behind by those enjoying returns on investment.’

These weren’t Fink’s exact words but they expressed his meaning. They also point to the two classes of capitalist society — the working class (those who work for an income) and the capitalist class (those who enjoy returns on investment).

More accurately, the working class is composed of all those who have to work for an income to survive, and the capitalist class of those who have sufficient returns on investment to survive without having to work.

What Fink wrote was that over recent decades:

‘… the vast majority of wealth has flowed to people who owned assets, not to people who earned most of their money by working. Since 1989, a dollar in the U.S. stock market has grown more than 15 times the value of a dollar tied to median wages. Now AI threatens to repeat that pattern at an even larger scale—concentrating wealth among the companies and investors positioned to capture it. This is where much of today’s economic anxiety comes from: a deeper feeling that capitalism is working—just not for enough people.’

He may be exaggerating — he himself later pointed out that when there is some technological innovation the companies producing and adopting it benefit and that this is ‘not unusual’ nor ‘inherently problematic’ — but he has an axe to grind. He argues that widening inequality could be avoided if more people owned stocks and shares; if they owned shares in these companies they would benefit from the rise in their stock market capitalisation. And of course BlackRock will be there to manage their share portfolio, for a fee.

It’s the old fraud of a ‘people’s capitalism’ that the Tories and the Liberals over here used to propose — making capitalism work for more people by giving them a share in profits.

Quite a few workers do own shares, though not enough to bring them an income to allow them to live without having to work, like capitalists. Fink quoted figures showing that in the US more than half of households own shares and that this is ‘a distinctive feature of American capitalism’ compared with Europe where only a third of households do.

This doesn’t mean that workers in the US are better off than those in Europe. It simply means that more workers there hold their savings as shares compared to Europe where more hold theirs as savings in a bank. The source of both the dividends on shares and the interest on savings accounts is profits made in capitalist industry, only in the case of interest on bank savings in a roundabout way.

Banks and assets management companies are in competition for the savings that workers might have. In Britain the asset management companies are currently running an aggressive advertising campaign to persuade workers to entrust their savings to them. Workers can make up their own minds on this. Savings in a bank are secure but, as they say, shares can go down as well as up.

One thing, however, is clear: workers will never have enough savings, whether in shares or in a bank, to allow them to live without having to work for wages. After all, if they did, who would produce the profits? Or the wealth society needs to continue to exist?

Letter: Controlling interests (1977)

Letter to the Editors from the April 1977 issue of the Socialist Standard

Controlling interests

In his book The Social Fabric of British Politics, Jean Blondel asserts that Marx’s concept of social class, as far as the ownership and control of the means of production, is no longer valid. He puts this down to the growth of the joint-stock companies in which the ownership and control of the means of production become more and more divorced. He went on to say that large quantities of people acquired shares without being interested in the control of the company of which they legally owned a portion.

Can the SPGB throw some light on this statement?

F. Edwards

London N.15

Reply:

The growth of joint stock companies is a reflection of the continual accumulation of capital. Capital can only accumulate as a result of the exploitation of the working class, which exists to serve it. The joint stock company allows for greater concentrations of capital by the investors (shareholders) who overwhelmingly are members of the capitalist class; the only people who own capital.

The fact that members of the working class own shares will only affect their class status if they can live on the dividends of those shares without the necessity of selling labour-power.

The sale of labour-power is the test. There are approximately 22 million wage workers in this country. Even if a greater number of workers acquired shares, the dominant and controlling interest will always remain with the owners of capital—about 10 per cent of the population who own 90 per cent. of the wealth. It also ought to be borne in mind that not all wealth, or even the bulk of it, exists in the form of company shares. Large private companies, and rich family businesses are not quoted on the Stock Exchange or share market.

Jean Blondel is talking nonsense when he says that Marx’s concept of social class is no longer valid. If this is so, how does he explain the existence of the present class struggle between capital and labour? A class is an economic category. The personnel may change, but the economic category must be defined according to the relationship of its individual members to the ownership or non-ownership of social wealth together with its means of production and distribution. The fact that some workers feel superior because they own a few shares, or because they hold a pawn ticket (known as a mortgage) for a piece of land does not remove them from the working class, whether or not they identify themselves with it.

The suggestion that people buy shares without being interested in the control of the company is not true of the large shareholders, as any shareholders’ meeting will testify. If Blondel’s remarks specifically refer to workers who own shares it is as meaningful as saying that workers who acquire a piano are not interested in playing like Arthur Rubenstein.

Editors.

Facts for Propagandists (1933)

Letter to the Editors from the October 1933 issue of the Socialist Standard

A correspondent asks a number of questions on matters of general interest to propagandists. Questions and answers are given below.

(1) The Working Class.

Question: "What percentage of the total population are really members of the working class?”

Answer: The working class consists of all those people who, not owning sufficient property to be able to live without working are compelled to sell their labour power, their mental and physical energies, to an employer in order to live. These and their dependents form the working class. As the definition covers not only the industrial workers, but also technical, professional, supervisory and managerial workers it will readily be seen that in an advanced capitalist country like Great Britain the working class and their dependents constitute the great majority of the population.

How large is the proportion of working class to the rest of the population can be seen from the estimate made by Dr. Bowley and Sir Josiah Stamp in “The National Income, 1924" (Published by Clarendon Press, 1927).

On page 12 they estimate that in 1924, out of 20,300,000 “occupied persons," 76 per cent. were wage earners, and 14 per cent. salary earners, total 90 per cent.; leaving 10 per cent, for the rest of the occupied persons. This 10 per cent. was made up of 6 per cent. “Independent Workers" and 4 per cent. “Employers, Farmers, and Professional." ("Independent Worker" means one-man businesses, etc.)

Carr-Saunders and Caradog Jones, in the “Social Structure of England and Wales" (Oxford University Press, 1927) reproduce the above figures (p. 63) and add the illustration that, on an average, there are about 24 employees to every employer.

Some qualifications need to be made. The above estimates refer to “occupied persons" only, and do not include children, wives, and other dependents who are not “occupied." If we assume that the average number of dependents of a wage-earner or salary-earner is roughly the same as the average number of dependents of an employer or of an “independent worker," we can say that the total population of all ages is divided in the same proportion as the occupied persons.

In other words, taking every man, woman and child in the country, 90 per cent. can be described as “working class," 6 per cent. “Independent," and 4 per cent. “farmers, employers, or professional/’ (“Professional" means doctors, barristers, free-lance journalists, etc.)

It is not known how many property owners who need not work actually do so and are reckoned among the above 90 per cent.

(2) Who Owns the Means of Production and Distribution?

The position is that the great bulk of the accumulated property of all kinds (including money) is held by a very small part of the population, either direct, or through their ownership of the shares of companies. A small proportion of shares in companies is owned by workers. There are also independent persons (owners of one-man businesses) who own a small part of the total property.

Carr-Saunders and Caradog Jones, in their “Social Structure of England and Wales," reproduce and comment on various estimates of the ownership of accumulated wealth. They use Sir Josiah Stamp’s estimates to show that in 1919—

about two-thirds of the wealth is held by just under 400.000 people (or less than 1 per cent. of the total population) and one-third of the wealth by 36,000 people (or less than 1 in 1,000 of the total population). (P. 114.)

Taking “occupied persons" instead of the total population, Sir Josiah Stamp’s calculations show that—

about 2½ per cent. of occupied persons over 20 hold about two-thirds of the wealth, and about 2½ in 1,000 hold one-third of the wealth, (p. 114.)

They quote Professor Henry Clay that—

64 per cent., or rather less than two-thirds of the wealth is in the hands of 1.7 per cent. of persons holding property.

These people (“1.7 per cent. of the persons holding property") represent only 0.85 of the whole population (p. 116).

According to Clay, at the other end of the scale—

96.2 per cent. of persons have only 17.22 per cent, of the national capital, (p. 116.)

Sir Leo Chiozza Money showed before the War, in his “Riches and Poverty" (Third edition, p. 72), that—

about one-seventieth of the population owns far more than one-half of the entire accumulated wealth, public or private, of the United Kingdom.

Mr. Hargreaves Parkinson, of “The Economist," in his “The Small Investor" (Blackie aqd Son, Ltd., 1930), shows that the total accumulated resources of “small investors" amount to only about 10 per cent. to 14 per cent. of the total wealth of the country. Under “small investors" he includes the owners of all kinds of savings, including Post Office savings deposits, Trade Union Thrift Funds, Co-operative Society Funds, etc. These “small investors," he says, represent at least 75 per cent. of the total population (p. 110).

In other words, according to Mr. Parkinson, more than three-quarters of the population own only about one-eighth of the wealth. The other seven-eighths is owned by less than one quarter of the population.

(3) What Percentage of all Wealth is Owned by Banks and Insurance Companies ?

We have no means of ascertaining easily what is the total value of all the property owned by Banks and Insurance Companies.

It must, of course, be remembered that the property of the Banks and Insurance Companies is actually the property of the shareholders, depositors and insured persons, and is, therefore, already reckoned in the estimates given in reply to question (2).

(4) The Workers' Wages.

“ What is the average wage of the workers in Great Britain?"

Colin Clark, M.A., in “The National Income (1924-1931)," states that Bowley and Stamp estimated the average earnings of 12 million wage-earners in 1924 at £122, while Clark himself estimated £116 ("The National Income," published by McMillan, 1932, p. 61).

These amounts are equivalent to about 46s. and 45s. a week. They do not allow for deductions for sickness and holidays.

Since 1924 wages have fallen appreciably; according to Dr. Bowley by 3 per cent. up to 1931. This would make the average wage now about 44s.

(5) Unemployment and the Poor Law.

“ What percentage of the population is unemployed and in receipt of public assistance?"

On May 22nd, 1933, the total number of unemployed on the Registers of Employment Exchanges in Great Britain and Northern Ireland was 2,653,852. (See “Labour Gazette," June, p. 207.)

This represented 20.5 per cent. (one in five) of the insured workers.

It represented nearly 6 per cent. of the total population. (There are, of course, an unknown number of unemployed who are not insured and not registered. )

The number of persons in receipt of poor relief in England and Wales (both outdoor relief and relief in institutions) was 1,340,638 at the end of December, 1932.

This represented about 3.3 per cent. of the total population of England and Wales. (See “Labour Gazette," March, 1933, p. 84.)

It includes, of course, a large number of persons registered at the Employment Exchanges as unemployed. With their dependents these number nearly 400,000.

(6) Who are the Buyers of Shares ?

“ Who are the institutions of people who buy or oversubscribe the usual large issues of shares ?"

Except by having inside knowledge of the subscriptions to particular issues of shares it is not possible to have direct information which would answer this question.

A general indication of the position, however, is given by Mr. Hargreaves Parkinson in “The Small Investor." He estimates' that small investors (who, with their dependents, represent over three-quarters of the population) own shares totalling between £500 millions and £750 millions, and that they buy shares in normal times at the rate of between £20 millions and £40 millions a year.

Divided over the whole number of persons these amounts are trifling.

How small they are can be seen by comparing them with the total holdings of shares, and with the total amount of new shares bought each year by the big investors.

"The Bankers' Magazine" keeps an index of the average price of 365 representative securities. These 365, which represent only part of the total number of securities quoted on the Stock Exchange, had a total market price in June of £6,249 millions, i.e., about ten times as much as the total shareholdings of the “small investors.”

The “Stock Exchange Official Intelligence (1931)" states that at the end of 1929 there were 108,698 companies having share capital totalling £5,200 millions (p. 2023).

Whereas the “small investors," according to Mr. Parkinson, buy shares worth only £20 to £40 millions a year, the total amount of capital of new companies registered in 1928 and 1929 was £237 millions and £240 millions (“Intelligence,” p. 2023).

The bulk of the shares are bought and held by Banks, Insurance Companies, trading and industrial concerns, investment trusts, etc., and by wealthy individuals.

(7) Wages and Wealth Production.

“ What percentage of the wealth produced by the workers is returned to them as wages?"

Colin Clark, M.A., in his "The National Income, 1924-1931," estimated that in 1929 the wage-earners received 39.9 per cent, of the total national income (excluding income from abroad, i.e., from foreign investments, etc.).

Salary earners received 22.5 per cent. Rent of land and buildings accounted for 7.8 per cent., and profit and interest accounted for 29.7 per cent. (p. 72).

In other words, the wage and salary earners, who represent nine-tenths of the population, received just over three-fifths of the total national income.

The wage-earners, who represent three-quarters of the population, received only two-fifths.

These figures relate to the whole number of wage earners, irrespective of whether they are engaged in wealth production or whether they are engaged in financial, trading, and other activities.

Taking Manufacturing and Mining Industries only, the Committee on Finance Industry (MacMillan Committee) in its Report (1931) published tables showing that earnings represent just over one-half of the wealth produced in those industries. (52 per cent. in 1906-7 and 55 per cent. in 1924.) (See p. 313.)

In 1924 the average net product per person employed was £220, while average earnings was £120. This means that each person employed was producing a surplus of £100 a year, over and above his own pay and after meeting all the raw material and other costs.

(8) Wealth and Waste.

“ What percentage of workers are engaged in luxury or useless or redundant occupations?"

An attempt to estimate this percentage is made in our pamphlet, “Socialism," to which our correspondent is referred.

(9) The Churches and Property.

“What percentage of all wealth is owned by religious organisations?"

We have no information on this subject.

(10) The Cost of the Armed Forces, etc.

“What percentage of the total income is devoted to the upkeep of army, navy and police?"

The cost of Police pay in 1931 was about £15,600,000. (See Report of Committee of National Expenditure, 1931, p. 42.)

The Army, Navy and Air Estimates for  1932-33 amounted to about £104 millions.

Taking the two figures together, we have a grand total of £120 millions.

Colin Clark estimated the total national income in 1931 at £3,322 millions. Therefore, the cost of the army, navy, air force and police represents about 4 per cent. of the total national income. 

Edgar Hardcastle

Finance and Industry: The experts are fallible (1962)

The Finance and Industry Column from the July 1962 issue of the Socialist Standard

The experts are fallible

The economic experts of capitalism—the City Editors, the economists, the financial seers—sit on something of a pedestal. Whatever twists and turns the economy may take, they are never caught without a remedy. Their readers, political parties, even governments, hang upon their words.

Which makes it very embarrassing for everybody, if the experts are shown to be as fallible as the rest.

Mr. Samuel Brittan is the Economic Editor of The Observer and last year, like all men in his position, he was expected to comment on the Selwyn Lloyd “pay pause” Budget. This is what he wrote, on September 3rd last:

I have a feeling that Mr. Selwyn Lloyd is going to surprise many people by his success in carrying out his economic policies . . . many of the people who are now most vociferous in denouncing him may be loudest in his praise a year from now.

Mr. Brittan went on to point out that in some ways the Lloyd policy was following behind events and then gave his reasons for thinking that ". . . Mr. Lloyd has been so much luckier than his predecessors . . ." 

Now—almost a year after—what does Mr. Brittan think of the Lloyd policies? Is he loud in his praise? He is not. He has been doing his homework in The Economist and has been impressed by an article in the 12th May issue of that weekly which drew some striking comparisons between the Lloyd squeeze, and what has followed it, and the Butler squeeze of 1957 and what followed that. This is what Mr. Brittan wrote in The Observer of 10th June this year:

On both occasions the same kind of arguments have led to the same mistakes. Mr. Selwyn Lloyd too often gives the impression of believing that history began in July, 1961, and has not devoted enough time to studying the mistakes of his predecessors.

And later in the same article:

Government financial measures have in recent years actually accentuated the trade fluctuations that they were supposed to control. 

If Mr. Brittan was wrong, a year ago, when he expected the Lloyd policies would be lucky enough to succeed, he could of course equally be wrong now that he is criticising the Chancellor. Capitalism is a baffling system which can catch out the experts. But if that is going to happen, there is no point in basing experts, is there?

By a few shares

A new campaign is announced by the Wider Share Ownership Committee, aimed as its name suggests to encourage more people to buy shares. It would seem to have timed its effort rather badly. After the recent Wall Street debacle we would imagine that many a small investor has gone back to his account in the Savings Bank or the old sock under the bed.

The number of shareholders in the U.K. has apparently increased over the past ten years from about a million to 3½ million. Much of this increase is presumably accounted for by firms like ICI distributing shares to their workers and to lots of small men being persuaded on to the stock exchange band-wagon by tales that capitalist inflation and prosperity were here to stay.

It will be interesting to see what success the campaign has and we hope the Committee will oblige us in due course with details of the number of shareholders in say six or twelve months time. They should make interesting reading, especially if there have been a few more stock exchange shocks in the interim.

At the same time, an analysis of how many hold how much would be useful as well as instructive. We have an idea that the greater part of those 3½  millions hardly matter when it comes to working out who really own stocks and shares.

Do they know?

Our editorial this month deals with the recent stock exchange shake-ups and makes the point that they basically reflect the general unease amongst capitalists concerning present economic prospects.

This unease has spread to most sectors of the economy and is obviously causing our politicians and their advisers some real headaches. Nor, in spite of the long words they like to use and their knowing looks, do they seem to have much idea of what to do about it all.

For example, hardly had Mr. Selwyn Lloyd finished warning us that he might have to lake fresh steps to tighten up demand than he calmly goes and cuts the minimum H.P. deposit from 20 to 10 per cent. Only a little while before, he had eased some of the restrictions on the banks. When it is remembered that he was apparently worried only a few weeks ago about a hire purchase boom, it all seems rather strange.

Some cynics have tried to explain the quick turn round as a by-election gimmick to help the Tories in their present political troubles. Perhaps so. But we have the shrewd suspicion that it only requires capitalism to go into the faintest suggestion of a spin for all the politicians and their economic experts to lose their balance. To be quite frank, we don't think really they have a clue.

The Gold Rush

One further thing we have heard for several years past from our experts is that with the new theories about money, credit, and the general control over capitalism, the importance of gold has become a thing of the past. Some of them have even gone so far as to regard it as a myth, a hoax that has been shown for what it really is by the new economic theory.

Unfortunately, our capitalists only seem to think there may be something in these theories when there is little chance of their being put to the test. Immediately things begin to get uncertain, they forget all about the theories and rush us quickly as they can into gold. Which explains the present sudden interest in gold mining shares and the heavy buying of the metal itself.

This is the classic way the capitalists have always acted in times of stress. Not currency, not stocks and shares; but lovely, shiny, golden, gold. As for economic theory, they will come back to that after the crisis has blown over.

Karl Marx, over a hundred years ago, would have found it a quite natural thing for the capitalists to do. He for one was under no delusion about the importance of gold to the capitalist system. The universal equivalent he called it, and universal equivalent it still is.

Stan Hampson

Fat Cats: creaming off profits (2003)

From the July 2003 issue of the Socialist Standard

At the beginning of June, the Trade and Industry Secretary, Patricia Hewitt, unveiled a discussion document which was spun as dealing with the issue of city “Fat Cats” – that is, directors of firms who receive bloated salaries and immense pay rises.

Her document Rewards of Failure. Directors’ Remuneration – Contracts, Performance and Severance: a consultative document is ostensibly concerned with directors whose pay schemes are disproportionate to the performance of the company under their tenure. However, it was linked by “Old Labour”-sounding concern with directors’ pay.

“Fat Cats” were on the news agenda already – the shareholders of GlaxoSmithKline (GSK) had voted the previous month to not allow a £22 million severance scheme for the director of their company. News items had been filled with images of the little people standing up to the corporate monster – complete with tweedy little old ladies and retired majors venting their frustration at the iniquity of directors remuneration packages growing as the value of their shares dwindled.

Similar resolutions at the general meetings of the HSBC bank and Corus, the steel firm, failed, with large institutional shareholders voting down the myriad small-holders. In the latter instance, the TUC noted in a press release that the workers at that company are under threat of pay freeze or even redundancy.

The trade unions have been banging on for years about “Fat Cat” pay. During long years of wage restraint the TUC and trade unions have complained about “inflation busting” pay rises for top executives. How, they ask, can freezes on the wages of a company’s employees be justified when directors are merrily awarding themselves massive pay packages, at many times the going rate of inflation (which is what most workers’ pay rises are held to)?

Many see condemnation of the “Fat Cats” as an old left, radical position, a useful bit of demagoguery. Clearly, it doesn’t hurt Labour every now and again to voice concerns over “Fat Cats”, especially so long as they hedge it, as the Trade and Industry Secretary did, in terms of supporting the rewards of success. All of this is a gift to the Tories, who are no doubt preparing “politics of envy speeches” at this very moment.

The problem, as can be seen by anyone who takes a moment to examine the way in which capitalism works, is that taking on the “Fat Cats” is emphatically not a radical position. It is, rather, taking sides in a dispute between capitalists and their lackeys on the boardrooms of their corporations. That is, there is no gain to be had from any of this for the workers – were the “Fat Cat” fees to be slashed, the ones to gain would not be the workers, but the shareholders, the capitalists who actually own the companies.

As Marx pointed out in Volume III of Capital, shares are not real capital, but “a share of the stock is merely a title of ownership to a corresponding portion of the surplus-value to be realised by it”. That is, share certificates represent a title to a share in the profits to be derived from capital that has already been invested in the form of the assets of a given company. These shares have no intrinsic value themselves, but can be assigned one based on the amount of income they represent. That is, the dividends – payments due to share holders – amount to a specific return on the magnitude of the share value, and should that income rise or fall, the nominal value of the shares will rise and fall accordingly.

Large companies are in competition with one another to attract new shareholders (through the issuance of new shares), and existing shareholders want to see the value of their initial investment rise. Thus, companies have to ensure that the size of their dividends is competitive compared to the general market. If the returns on the shares in a specific company are higher than in the general market, demand for them will rise, and their putative value will rise accordingly. Thus, the ratio of return will remain roughly the same as that on shares in other companies.

This means that, to stay in business, the board of directors of a firm must pay dividends on a regular basis. A good example of this was the failed Railtrack railway owning company in Britain, which managed to find funds for its shareholders dividends, despite not raising a commercial profit. It managed this largely by selling off assets, mostly land and facilities. The board of directors also has the unfortunate responsibility of setting the pay for its members.

Share in surplus value

As Hewitt’s consultative document shows, this process is regulated by legislation on the pay of directors. The members of boards of directors are chosen by, and normally from amongst, the shareholders to administer their affairs for them and in their interest. That is, they act of behalf of the absentee owners, who have now become utterly redundant to the supervision and reproduction of their own capital accumulation let alone to the actual process of production. Someone does not become a capitalist purely by dint of being the managing director of a capitalist firm. However, the possibility exists – through the position of being in practical control of the companies – for the directors to arrange affairs so that they may cream off some of the profits that would otherwise go to the absentee shareholders.

In the case of most directors it is not a free market that sets their “pay”, i.e., their share of surplus value in return for managing the affairs of the other shareholders. They apply networks of association to restrict access to the jobs, and then set one another’s pay. They have a number of means by which they can supplement the appearance of receiving a set salary. They pay each other bonuses for performance, which they get automatically, no matter how they have performed. They get share options, the right to buy shares at a future date at a set price, which will usually be less than the going market price (giving them an instant windfall). They get, as they tried to get at GSK, severance packages that ensure massive payments on departure.

These directors use control over the process of exploitation to secure a share in the surplus value produced. The source, ultimately, of capitalist profits is the difference between the price of product of labour, and the cost of hiring the specific types of labour involved in realising it. That is, between the value of the work we do, and the cost of maintaining and reproducing our capacity to do that work. That is, the profit falling to capital is set by the conditions in the labour market which regulate how hard they can make employees work, and how much they can pay them. Once that profit has been realised, there is no essential mechanism determining how that profit is divided among the various members of the capitalist class.

This becomes a matter for legal and contractual relations between capitalists, as they use a variety of rights to secure their share of the profit, with landowners securing rent, financiers securing interest, etc. Each takes a profit from the total of surplus value extracted. In the case of stock held companies, the shareholders take their share in the form of dividends. The board of directors are able, in this circumstance, to use their position, to secure whatever profit remains after the dividends have been paid out.

In effect, the directors are swindling the shareholders, taking a share in their profits, based on the fact that they aren’t in a position to control the directors effectively. Hence why it is shareholders who are leading the attack against “Fat Cats” – they understand that it is their money that is paying those salaries, it is their profit that is supporting the half million pounds or more a year for a top corporate director. It is, for all its apparent radicalism, a spat over who gets the booty, who gets what share of the unpaid labour of the working class.

These facts are reflected in the craven pro-shareholder outpourings from the TUC on this subject. In their press release “TUC join with Dutch and German unions against excessive executive pay”, they maintain that “business legitimacy is being eroded as Europe’s citizens are shocked by further examples of this new creed of greed” and that “too often in recent years it has seemed that executives regard companies as vehicles for self-enrichment rather than for the creation of wealth for all stakeholders” which they interpret by asking “are these excessive executive pay arrangements in the interests of shareholders, and likely to lead to wealth creation?”

Socialists look at this trend and stand by their contention that it is the workers who produce the wealth, and the capitalists who make their profits from our unpaid labour. Further, we look upon this squabbling between the capitalists and their agents, and see how redundant the capitalist has become to the whole economic process. The “Fat Cats” question is a matter of a spat among parasites. Rather than seeking to hold down the pay of the directors, we should be seeking to take control of the productive process for ourselves, so that the immense riches it produces can be directed toward our benefit not theirs.

Pik Smeet

Proper Gander: The maxim of maximising (2025)

The Proper Gander column from the March 2025 issue of the Socialist Standard

In The Prophets of Profit, a five-part documentary on Radio 4, the BBC’s Business Editor Simon Jack ‘tracks how a simple idea became so powerful and why it shapes all of our lives today’. This idea is a common approach to running companies, and its ‘prophets’ are economist Milton Friedman and his successors. Being a radio programme, there aren’t any visual distractions to the words spoken by Jack’s interviewees or his explanations of the technicalities of commerce, which are more detailed than most documentaries bother with. However, this makes it harder to discern that buried underneath the talk of ‘maximising shareholder value’, ‘creative destruction’ and ‘equity-based compensation’ are the practicalities of goods being made and used by people.

The series takes 1970 as its starting point, when Milton Friedman’s article ‘The Social Responsibility of Business is to Increase its Profits’ was published in the New York Times. Clear from the title, Friedman’s ‘simple idea’ is that the main aim of corporate executives is to encourage profits, and any responsibilities a company has to wider society are covered by the wealth it generates. The documentary describes his influence through economists such as Michael C Jensen and Bill Meckling, who went from ‘disciples of Friedman to preachers for a new muscular brand of shareholder supremacy’, according to Jack. They, and those they inspired such as ‘corporate finance specialist’ Don Chew, believe that businesses have been held back by legislation and placing too much emphasis on cultural and environmental concerns or perks for staff such as pension schemes.

Chew quotes the view that ‘we’ve reached the point where every corporate interest is represented except for shareholders in the corporate boardroom’. To ‘correct’ this, executives should focus on directly maximising the value of shares, and this would lead to a better return on capital for shareholders than investment in wider issues. A sympathetic government would support this approach by minimising tax rates, regulation and legislation. Techniques to enhance share value which became popular through the 1970s and 80s included firms borrowing more to finance targeted growth, and ‘using cash generated by the business to buy back shares from existing shareholders so they can go and invest the proceeds in new industries’. Chew brags that Americans in particular have become adept at squeezing money out of failing organisations and in to growing industries, so the loss of one company means a boost to others. This is one application of ‘creative destruction’, a concept popularised by political economist Joseph Schumpeter, but which was earlier critiqued by Karl Marx. Those with an optimistic view of capitalism would say that overall this can lead to economic equilibrium, ignoring the hardships workers face when on the wrong end of ‘creative destruction’.

Maximising shareholder value also supposedly creates an equilibrium by being the most effective discipline to mould a well-run company for all, generating taxes for governments to spend while making innovative, decent products and happy workers. With this view, we’re expected to believe that wealth will trickle down to where it deserves to be. The series covers some of the actual consequences of the drive to raise shareholder value. Michael Jensen advocated ‘equity-based compensation’: executives being paid in shares to give them additional motivation to improve the company’s coffers. He didn’t foresee that many would be paid with salaries and bonuses as well, leading to a massive gulf between their income and that of most workers, nor that firms involved in scandals during the 2008 financial crash tended to have executives motivated by ‘equity-based compensation’. And as explained by economist Sir John Kay, a short-term focus on generating wealth can have disastrous effects, such as when crashes of Boeing’s 737 MAX aircraft were blamed on prioritising profits over investing sufficiently in safeguards.

The series uses the late-80s privatisation of the water industry as an example of Friedman’s ideas being put into practice in the UK. Michael Howard, the Tory Minister who oversaw this says that when owned by the state, the water industry had to compete for funding with other institutions such as the NHS. He claims that since privatisation, investment in the sector has always been higher than it was beforehand. However, in the ten years that Macquarie Group Limited owned Thames Water, it didn’t invest any of its own money in the business, which was sold off when in debt, with prices to customers subsequently raised. Sharon Graham, the General Secretary of Unite, is in favour of renationalisation, saying that water privatisation has led to poorly run services while shareholders have taken £72billion. As illustrated by Howard, though, being state-owned doesn’t mean that industries will be adequately resourced, or effectively managed either.

The impetus to maximise shareholder value has also led to ‘wasteful’ exercises such as American vehicle manufacturers buying steel from China rather than from more expensive local producers. This led to a decline in the American steel industry, which President Trump has said he’ll address by imposing tariffs on metal imports (presumably leading to ‘creative destruction’ elsewhere). Another example of Trump contributing to a change in what methods are seen as enhancing shareholder value is his dislike of ‘wokeness’ enabling companies such as Meta, Amazon, Walmart and McDonald’s to ditch their ‘diversity, equity and inclusion’ programmes.

The Prophets of Profit is timely in being broadcast during a shift back to the directions preferred by Friedman and his followers, especially in the USA. Much of episode four is an interview with Paul Polman, who took the opposing stance when he was Chief Executive of Unilever during the 2010s. Investing in staff and green programmes didn’t prevent Unilever’s returns to shareholders quadrupling in value during the decade Polman was in post. Maximising shareholder value was still the priority, though. This doesn’t really change, even if the most profitable approaches to achieve it alter over the years. The resurgence of Friedman-esque policies is a reminder that supposedly responsible business practices such as safeguards, regulation and workers’ rights can be lost as soon as they stop being compatible with the interests of the capitalist class.

Mike Foster

Sting in the Tail: The restrictive society (1995)

The Sting in the Tail column from the March 1995 issue of the Socialist Standard

The restrictive society

Capitalism is a divisive society that not only puts worker against capitalist in a fierce class struggle. It also drives worker against worker in competition for work and wages.

A recent example of this is illustrated in the Independent (24 December) under the headline “Bring back pass laws, says black South Africans”. This report dealt with the influx of illegal immigrants to South Africa from Zaire, Mozambique and other African countries.

"Pass laws may make a comeback in Nelson Mandela's new democratic South Africa. Many black people who were victimised by them under apartheid in the past are now looking with favour on controls for immigrants. "

What a miserable society capitalism is. In the last two months of 1994 the South African government had deported 50,000 workers back to Mozambique. The same sorry story applies to Mexican workers deported from the USA. Capitalism is a world-wide system of exploitation and restriction.

Only inside a socialist system of society will men and women be free to roam the world as they desire.

Shared fantasy

First, the Fantasy Football league and now the Fantasy Share League, a creation of BBC2's Working Lunch programme. Players are invited to compete with the City of London's professionals in forecasting how shares will perform and to back their judgment by pretending to buy and sell them.

But what chance can the amateur forecasters have against the professionals? One clue was provided by Mick Clarke, Stock Market Correspondent of the Times, who confessed on Working Lunch that he had been plugging Asil Nadir’s Polly Peck company prior to its collapse.

And an article in the Guardian (27 December) reviewed how the experts had fared in 1994:

“Most of the City’s leading ‘gurus’ are probably wishing they could have eaten their words — especially those issued with great confidence this time last year. ”

When it comes to predicting how any market will perform, the only real difference between professionals and amateurs is that the former get paid for doing it while the latter do it for nothing.

Muddle-headed Ken

Ken Coates, Labour MEP, is upset over Tony Blair’s plans to change Clause Four of the Labour Party’s constitution. You can tell this from his comments on Blair and the Party “modernisers’’ whom he described as:

“bastards and shits who are going to walk past the unemployed” (Guardian, 14 January)

Does Coates really think that Clause Four, which he says “I cannot live without”, ever made a scrap of difference to unemployment under Labour governments? The fact is that every time Labour left office unemployment was higher than when it came in.

But Coates also asked an interesting question:

“How can you talk about equality and assume the permanent continuation of employers and employees?"

If he is being serious here then what is he doing in a party which, despite the presence of Clause Four, has always endorsed the production from profit system of which the employer/employee relationship is such an integral part?

Trial by torture

Kilroy on BBC1 isn’t one of Scorpion’s favourite TV programmes but the edition on 20 January was riveting stuff.

Two Tories were stuck with the task of defending the government against an angry bunch of OAP’s who complained over and over about their poverty. The luckless pair were Barbara, a County Councillor, and Daniel, a would-be Tory' MP.

And how they floundered as they tried to deal with the pensioners' flood of accusations: Barbara couldn’t even bring herself to say the word “poverty”, preferring instead “lower living standards”, while Daniel could only answer the demand for higher pensions by bleating “Where's the money to come from?” and insisting that “People should save more for their old age.”

It was a joy to see how those Tory' apologists were made to squirm by the pensioners, but the dogged way in which they defended the indefensible must have earned them the admiration of every watching politician.

Alive and kicking

Are trade unions finished? Vicious antiunion laws, large-scale unemployment plus the growth of part-time work have planted the idea among many workers that TUs can no longer produce results. These changed circumstances do mean that unions are not so effective as they once were in some activities, but they are increasingly effective in others.

For example, figures published by the TUC show that the unions won £335 million in 1993/4 in compensation for members who suffered injury or ill-health at work or were unfairly dismissed. This figure represents an eight percent increase over the previous year and is in spite of falling membership.

Socialists are the first to point to the limitation of trade unions, but their value to workers in the industrial struggle remains and should not be underestimated.

Pseudo-revolutionaries corner

In the olden days when the Communist Party used to exist they used to justify every change of “tactics" by reference to “dialectics, comrade, dialectics”. Now their mantle has fallen on the SWP whose leader Tony Cliff spouts the same gobbledegook Here he is writing about the “third stage”of the industrial struggle:

"Now we come to a problem. The level of generalisation is on the one hand quite low, but at the same time it is quite high. This sounds like a contradiction, but the contradiction is reality. ”

Eh?

Scorpion

How Many Shares Have You? (1975)

From the September 1975 issue of the Socialist Standard

How often have Socialist speakers heard the absurd defence of Capitalism that, because anyone can now own “shares” in companies, everyone is a capitalist. The argument goes on to claim that therefore the working class are no longer the deprived majority of society.

W. S. Gilbert would no doubt have retorted “if everyone is somebody, then no-one’s anybody”. And of course, even if it were true that most people own a handful of shares it would not alter one iota of our fundamental criticism of capitalism. Our criticism is that capitalism is incapable of solving the major social ills that it constantly creates. All it does produce are profits for the capitalist class and problems for the working class.

But the claim is false. It is by the possession of shares that the capitalist class in advanced western capitalism (a different arrangement prevails under Soviet capitalism — no less anti-social) claims most of its ownership of the means of production and of the commodities that are produced. Shares are either owned by individuals or by companies, unit trusts (the so-called “institutional shareholders”) and the like.

As far as individual shareholdings are concerned, there is no doubt that the overwhelming majority of the population don’t own any. In his book Unequal Shares A. B. Atkinson says that 5 per cent of the population own over 96 per cent of the privately held shares and 1 per cent own 81 per cent. That does not leave much for the rest of us. Clearly the majority of workers have never seen a share certificate, let alone owned one.

With institutional shareholdings the position is more complicated. A good deal of the shares are owned by companies whose shares are themselves privately owned. “But what about pension funds and the like?” the defender of Capitalism plaintively bleats. “They are held for the benefit of the workers, for retirement money, injury pay etc. In effect, these are owned by the workers.” Rubbish.

According to the Royal Commission on Income and Wealth (Report No. 1, 1975) only 12.2 per cent of the total number of shares quoted are owned by Pension Funds. These funds are established by large firms like ICI or Fords for sound economic capitalist reasons. And they are set up to benefit the companies (i.e. the shareholders).

Indeed it is a well established principle of British Company Law that all moneys must be used by the company for the benefit of the shareholders only. When the old News Chronicle was closing down in the early 1960s the directors wanted to pay some of the money realised from the sale of the company’s assets to the work force as compensation for their loss of jobs etc. The high court stopped them. Money given to workers was not being used in the best interest of the company it said. The only way the money could be lawfully distributed was to the shareholders.

So in order for these “pension funds” to be lawful, the company must show that they are in the best interests of the company’s owners. And they are. There are many reasons why it is of direct benefit to the company to have pension funds and it would take a whole issue of the Socialist Standard to explain them fully. But some of the more obvious ones are these: —

1. It is another bait for the work force, just as luncheon vouchers or sports facilities etc. are. Workers know too well the miserable pensions the state will pay them when they retire and “non-contributory pension schemes” are one of the things the employer can offer to supplement a low wage.
2. Once employed the worker is encouraged to feel that he has a “stake” in the company and that if he leaves he will lose his right to a pension or it may be reduced.
3. Above all, the money in pension funds belongs to the company. Admittedly it cannot actually be spent by the capitalist class, but then neither can machines. When profits are “ploughed back” into a business these are not lost to the capitalist class. On the contrary, they represent a greater accumulated share of capital than was represented by the company’s assets before. A pension fund is as much a part of the capital of a company as is the factory or the stock-in-trade, and this will be reflected in the value of the shares on the stock exchange.

Capitalism doesn’t give workers shares, it only gives them crumbs. Socialism will mean free access, not unequal shares.

Ronnie Warrington

Correction (1981)

From the September 1981 issue of the Socialist Standard

In the October 1980 Socialist Standard and some subsequent issues, it was stated that less than one thousandth of the British population own eighty per cent of privately owned shares. This figure was taken from the CIS report The Wealthy, and is incorrect. They say that one per cent of shareholders own eighty per cent of the shares, whereas it is in fact one per cent of the population. (Only seven per cent of the population are shareholders.) The correct figure can be found in Class in a Capitalist Society by J. Westergaard and H. Resler, Penguin, page 158. They use Inland Revenue Statistics to show how one hundredth of the population own over eighty per cent of shares. We apologise for the error, although we have the impression that most of our readers are in the ninety-three per cent without a single share to their name, in any case.

Pity the Poor Capitalist. (1931)

From the March 1931 issue of the Socialist Standard

The Economist newspaper’s index of profits, based upon the accounts of 1,932 concerns, shows that the net profit, after payment of debenture interest, etc., was practically the same in 1929 and 1930, the respective totals being £198,800,000 and £197,500,000. The decline is only 0.6 per cent. (See Supplement, Feb. 14th, 1931.)

The rate of dividend on preference capital was slightly higher than in 1929 (5.7 per cent., as against 5.5 per cent.), while the average dividend on ordinary capital was lower (9.5 per cent., as against 10.5 per cent.).

The rates for the past ten years, and for five years before the war, are given below :

The Manchester Guardian (January 6th) published a list of profits of about 240 “important public companies.” More than half of them made higher profits in 1930 than in 1929, and the total profits in 1930 of all the companies (after deducting losses) amounted to over £8 million more than in 1929.

The Times published a summary of the profits of 176 British industrial concerns, “showing the broad tendency of profits in British industry as a whole.”

The average dividends in 1930 represented 8.4 per cent. of the paid-up capital, as compared with 8.2 per cent. in 1929. (See The Times Annual Financial Review, February 10th, 1931.)

The Banker’s Magazine Index of the market values of 365 securities shows that in December, 1930, the average value, while about 5 per cent. less than in December, 1929, was still 16.8 per cent. above the level of December, 1921. (See Economist monthly supplement, January 24th, 1931.)

Edgar Hardcastle

Material World: Shareholder capitalism (2024)

The Material World column from the January 2024 issue of the Socialist Standard

In the last few decades the growth of institutional investors, in particular, in the guise of various kinds of funds – such as mutual funds, pension funds and, more recently, hedge funds – has been a powerful force in shaping the development of financialisation. Their large size has afforded them the leverage to impose a particular kind of financial logic on corporations with the focus very much on maximising ‘shareholder value’.

The CEOs – Chief Executive Officers – of big corporations have emerged as key agents in this trend, their commitment to the interests of shareholders having been firmly cemented and assured by means of such devices as stock options. This has had the effect of more closely aligning the interests of CEOs with those shareholders and is reflected in the astronomical rise in payouts to the former, an increasing proportion of which is, in effect, unearned income. Thus, whereas in the 1960s, America’s CEOs took home roughly 20 times what the average shop-floor worker made, today the figure is about 400 times or more.

Under increasing pressure to prioritise short-term results, managers are more inclined to make decisions that promote increased share value, such as mergers, acquisitions, and stock buybacks, rather than investment in physical production. Compliance is enforced by the threat of shareholders revolts, takeover bids by rivals or leveraged buy-outs by equity funds. The figures speak for themselves; more in the way of shareholder payouts means fewer funds available for investment, relatively speaking. According to Sam Pizzigati:

‘Between 1947 and 1999, non-financial U.S. companies shelled out an average 19.6 percent of their operating cashflow to shareholders, notes economist Andrew Smithers. The second half of that half-century saw stock options become an ever more dominant source of corporate CEO compensation. The 21st-century result? Between 2000 and 2017, the Smithers research finds, the average corporate cashflow to shareholders more than doubled to 40.7 percent’ (Sam Pizzigati, Aug 10, 2023 ‘Have Our Corporate Chieftains Become Expendable?’, Counterpunch).

Investment in physical production often involves certain immediate cost outlays and delayed benefits. That might require the board of directors to approve a request from the executive team to suspend dividend payouts (to the chagrin of shareholders) for the time being in order to finance this investment. Their reluctance to do this is a function of the shrinking time horizons (‘short-termism’) that businesses are subject to in an increasingly competitive world. All this has been aided and abetted by computerisation and the use of algorithms that have greatly speeded up decision making and made it imperative to adopt decisions that benefit a business in the short term with little thought of the long-term consequences.

Investing in the ‘real economy’ has the risk that in building up productive capacity one might exceed what the market is capable of absorbing – not least when your rivals might be wanting to expand output as well. Thus, it may sometimes be more prudent to simply buy up existing production capacity via mergers or acquisitions than increase that capacity yourself.

It is developments such as these that call into question the traditional image of the modern corporation as classically set out in Adolph Berle and Gardiner Means´s 1932 book, The Modern Corporation and Private Property. This seminal work helped to fix the image of the modern corporation in popular consciousness as an entity in which ownership is dispersed among numerous (and relatively inactive or powerless) and often small investors (thanks to the institutionalisation of laws such as those pertaining to limited liability that supposedly encouraged wider investment among the population by mitigating potential losses) with corporate control being decisively wielded in the hands of non-owning managerial elites.

Recent developments closely aligning the interests of CEOs with those of shareholders via the use of stock options and profit-based performance bonuses – major components in the compensation packages of modern-day corporate CEOs – have put the matter beyond doubt. Moreover, some of these compensation packages are on a scale that would certainly place their recipients in the ranks of the capital-owning class, even if only the lower rungs of that class, taking into account that a sizeable and growing chunk of that income is unquestionably ‘unearned’.

CEOs may ‘work’ but the mere fact that one works does not, of course, make one working class – any more than the possession of small amounts of capital makes one a capitalist. There is a certain point at which a change in quantity (in this instance, with respect to how much capital one possesses) translates into a change in quality or kind (from worker to capitalist).

In other words, and contrary to what the managerialist paradigm asserts, what we are seeing here is a convergence, not a divergence, of ownership and control. The top echelons of corporate management are, in effect, being steadily absorbed into the capitalist class. Alternatively, you could also see this as a case of members of that class taking on a more (pro)active managerial role in their companies for various reasons.

An extreme example of this would be someone like Elon Musk who, as well as having a personal fortune of $190 billion to his name, is said to have enjoyed a ‘compensation package’ involving performance-based stock options from the electric vehicle manufacturer Tesla, (of which Musk is the CEO), exceeding US$10bn in 2021. Clearly, this individual has no need to work whatsoever given the size of his personal fortune. It’s just that he chooses to do so for reasons we can only speculate on but are not, in themselves, important.

In short, then, capitalism has morphed from something like the kind of managerial capitalism that commentators like Berle and Means had in mind back in the early 20th century to today’s full-on ‘shareholder capitalism’.

Robin Cox

The Atrocities of Peace. (1928)

From the May 1928 issue of the Socialist Standard

A shareholder at the annual meeting of the London and North-Eastern Railway Company told a painful story of the pitiful condition which exists among his unfortunate fellow holders of shares. 

“He knew women who had to work initials on handkerchiefs because they had got no return on their capital invested in this company” (Star, March 2nd).

The horrible position of these unfortunate women “who had to work” because they got no return on their capital, cannot fail to rend the hearts of the millions of working men and women who “have to work” because they do not own any capital in this or any other company.

Edgar Hardcastle

Finance and Industry: Even more Superfluous (1967)

The Finance and Industry column from the May 1967 issue of the Socialist Standard

Even more Superfluous 

A common defence of capitalism is that now-a-days millions of people are investors, directly or indirectly, in industry. Pension funds, insurance policies and unit trusts are cited as examples. The suggestion is that wealth is more evenly distributed. Harold Wincott, in the Financial Times of 7 March, in discussing a survey on how big business gets its hands on our savings, puts it this way: 

And, finally, a word on the alleged enormous discrepancies of wealth in this country we are always being told about How does one reconcile the recurring calculations that x (a tiny) per cent of the population owns y (a vast) per cent of our wealth with Dr. Richebacher’s figures of the massive and continuing movement away from private hands into the hands of institutions which hold them in trust for the people?

If Wincott thinks that the calculations showing “enormous discrepancies of wealth” are wrong it’s up to him to show where. In fact these calculations do take into account pension schemes, insurance policies and unit trusts. Wincott asked a question and got his answer from a correspondent who made the simple point:

The short answer may be to ask why one should attempt it. Surely the types of assets owned can vary without affecting x and y.

In fact the whole argument bears all the marks of a public relations trick to gain popular support for Big Business and the Stock Exchange against any measures they feel might harm their interests.

A study by the London Stock Exchange, How Does Britain Save?, was published last May. It shows 33.5 million out of the 36 million adults in Britain save in one way or another. These savings are broken down:

The two-and-a-half million share owners (only 7 per cent of the adult population) are further broken down (some have more than one type):

There has been a shift from individual to institutional investors on the stock exchanges though not all these institutions hold shares “in trust for the people.’’ The insurance companies and banks are profit-making bodies whose own shares are traded on the stock exchange. In any event, the wealth of institutions can be traced back to individuals in the end and this is done to get estimates of the concentration of the ownership of wealth.

It is difficult to see how the growth of institutional investors is a justification of capitalism. In fact it makes the basic absurdity of capitalism—social production yet sectional ownership—even more obvious. When the joint-stock company appeared a hundred or so years ago, Marx wrote that in separating management from ownership it meant that “the capitalist disappears as superflous from the productive process." Engels was less polite. He spoke of “parasites”.

Now the last in the long list of social functions the capitalists imagined they had has gone: as individuals they can no longer claim to be the main source of finance for industry. Even this function, only necessary under capitalism, is now carried out by anonymous institutions. The individual capitalist — one-time alleged abstainer, organiser and risk-taker —is shown to be superfluous even in the realm of finance.

The savings of wage and salary workers, such as they are, are mainly funds to use when not employed. Having a few hundred or even a few thousand pounds worth of savings doesn’t turn anybody into a capitalist. Even the slaves in Ancient Rome had a fund called a peculium, collected from tips, which they could use to buy their freedom when old. A capitalist is someone who has enough wealth to live without having to sell his mental and physical energies.

Accepting that shareowners are now

functionless, Labour theorists argue that ordinary shares should be abolished and all investors receive just a fixed rate of return. Callaghan, the present Chancellor, told the 1952 Party Conference:

Instead of making the Ordinary shareholders residuary legatees of all profits that are made, let us make the workers the residuary legatees. Let the shareholders be content with a fixed dividend. Let us abolish Ordinary shares.

The government has brought in a new Companies Bill but, needless to say, even Callaghan’s suggestion is now too radical. Not that converting equities into fixed interest stocks will end the exploitation of man by man or abolish the right of property-owners to a property income.

The real solution should be obvious: convert the already socially-operated means of wealth-production into the property of the whole community. Then production can be organised for use without the restrictions of profit-making, finance and commerce.

Adam Buick

Utopia—on easy terms. (1927)

From the August 1927 issue of the Socialist Standard

Our masters, despite their cant about our improving conditions, well understand the remote possibilities of the workers being able to save from the meagre portion of their product returned in the form of wages. Inviting the workers to become shareholders on the instalment system is a grim joke. A scheme has been introduced by the Southern Railway with this objective :—

“For a workman to secure £10 worth of stock it is necessary for him to pay one instalment of 1/6 and then for 77 weeks 2/6 will be deducted from his pay” (“Daily Chronicle,” May 23, 1927).

Assuming “regular work,” after 15 years’ saving against the rainy day, he will have accumulated sufficient to bring him in at (say) 5 per cent. the sum of 2s. per week. It is to be hoped that, even if he and the job last, he does not encounter a heavy shower, otherwise his “rainy day” savings will be a “wash out.” Some may protest that large numbers of the workers do “get on.” If they do, then why do they not figure as income tax payers? Including the body of professional and other workers who pay income tax as an item in the cost of living :—

“The numbers of liable persons paying income tax in the years in question are estimated at 2,400,000 for 1924-25 and 2,300,000 for 1925-26” (Answer given by Mr. Churchill to a question in the House of Commons—Hansard, April 12, 1927).

Here is evidence of the capitalist myth that wealth is becoming more evenly distributed. It shows two extremes. Out of the ever-increasing wealth produced by the working class alone, the wages system means for them that they can never obtain, as a class, more than that which reproduces their slave condition. We have demonstrated it often enough ; a capitalist Chancellor of the Exchequer lends additional support to our claim.

W. E. MacHaffie

Missing millions (1984)

From the March 1984 issue of the Socialist Standard

Do we need the capitalists of the world? On this important question there is a mixed message from the media. At one time their hungrily snapping camera operators show the rich sporting on the ski slopes or lounging on tropical beaches, the very picture of idleness and social redundancy. At another their wheedling writers tell us that the rich are essential to the smooth, productive operation of modern society. It is, they assure us, something to do with the capitalists so generously investing their wealth so that the rest of us can be employed. Unless they are allowed to exploit us to their own huge advantage then we shall all be out of work and civilisation as we know it will disintegrate.

Some light was thrown on this popular theory by the recent affair of Reuters and the Press Association. The PA—the British national news agency—was set up in 1868 and as an organisation it took a shareholding in Reuters. When Reuters was recently floated on the Stock Exchange it emerged that many of the shareholders in PA, the price of whose shares had climbed steeply, could not be found. This was no trifling matter for the missing shareholders were worth something like £9 million.

This started an excited search and a spate of frantic claims by fortune hunters, led by the chief researcher of Burke's Peerage, where they know a thing or two about inherited wealth, the lives and luxuries of the parasite class in society and the importance, if you are a member of that class, of knowing who your ancestors were.

Amid all this excitement, an essential fact was overlooked. For all this time, the Press Association and Reuters have been operating without any involvement by the missing shareholders and without these lucky people even being aware that they have an interest in the company. There is no evidence that the work of the agencies suffered thereby; the news and the information flowed in and out. was edited and circulated without anyone feeling under any handicap.

The reason — which has been known to socialists for a long time — is that such work is done by the working class, who are not just the exploited and repressed section of society but also the useful, productive class. Wealth, in all its forms, can be produced by human beings without the ludicrously needless intervention of the priority that it must result in a profit for the owning minority. The shareholding class are redundant in any social sense; a sane society will be able to run efficiently and easily without them.

Do we need the capitalists of the world? We have news for you . . .

Good Advice (1943)

From the January 1943 issue of the Socialist Standard

In an article on the future control of industry, a writer in The Times (September 19, 1942) remarks that many shareholders look forward to nationalisation for the same reason that shareholders "rejoiced when the London Docks were nationalised." He adds : -

  We must beware of the people who advocate Socialism in order to make the world safe for capitalists.

They Hide the Truth (1937)

From the February 1937 issue of the Socialist Standard

The Facts about Riches and Poverty
There are still many people who believe that we are mistaken when we charge the Press and politicians with deliberate suppression of information affecting the vital interests of the working class. Those who believe this should study the way in which newspapers and statesmen of repute conspire to hide from the workers the extent to which the ownership of wealth is concentrated in the hands of a small minority of the population. Never a week goes by without speeches articles and editorials assuring the workers that wealth is evenly distributed in democratic Britain, and that any inequalities there may be are lessening year by year. The huge fortunes of the Ellermans, Houstons, Nuffields and so on are dismissed as rare exceptions, which, anyway, are supposed to be vanishing because of the death duties levied on them when they pass to the heirs. All of this is a deliberate mockery of the truth. The journalists who write the articles—at least the better-informed ones—know that the truth is far different, but they have their living to get and must obey their proprietors' orders. Behind the journalists are the newspaper proprietors, the big business men and the politicians, who have no excuse for what they do except the excuse that if the workers knew the truth they would soon want to do something about it.

A case in point, just one out of many, is an editorial in the Daily Telegraph (January 16th, 1937) entitled " Britain a Nation of Capitalists." It is based on a familiar piece of camouflage which consists of presenting a huge-seeming figure of "small savings" totalling £3,000 million gathered together in the savings banks and other institutions, and saying that this belongs to the working class. As nothing is said of the far larger sum that belongs to the small number of big property owners there appears on the surface to be justification for the Telegraph's claim that wealth is "diffused through the whole community in quite considerable amounts."

Let us, then, look closely at the figures.

Even if they were accurate they do not mean much. For, as the Telegraph admits, the £3,000 million belongs to 15 million people, equivalent to £200 per head. The interest on £200 at 2½ per cent, (the rate paid in the Post Office Savings Bank) amounts to a mere £5 a year, less than 2s. a week. Yet it is on the strength of this 2s. a week that the Telegraph describes the wage-earners as a "nation of capitalists.” Moreover, the figures are not correct. The sum mentioned does not belong wholly or even mainly to wage-earners. As Mr. Hargreaves Parkinson points out in The Small Investor (Blackie & Son, Ltd., 1930) much of it belongs to relatively wealthy persons, professional men, small business men, etc. Then G. W. Daniels and H. Campion, in The Distribution of National Capital estimate that there are 17 or 17½ million persons aged 25 or over who own less than £100, the total, being well under £1,000 million or less than a third of the Telegraph's inflated figure.

Moreover, even if a larger figure is taken the glaring fact remains that it is only a tiny percentage of the accumulated wealth which belongs to the small minority who are the real owners of Great Britain. As Mr. Parkinson and many other investigators have shown, less than one-quarter of the population own between them nine-tenths of the accumulated wealth. They do not get from their investments a mere 2s. a week, but vast sums enabling them to live in luxury and idleness and yet accumulate fortunes running in some cases into 10 or 20 million pounds. The Telegraph, along with other papers, and along with the capitalist politicians, does not attempt to deny these facts. Instead it ignores them and merely presents part of the picture in a distorted form. The Telegraph writes of the savings of small investors but says nothing about the immensely-greater sum, £13,000 millions to £14,000 millions, owned by the 5,000,000 persons who own over £100. Particularly it does not mention the handful of 10,000 or 11,000 persons aged 25 and over who own £3,200 to £3,500 millions between them. Thus does capitalism lie and suppress in order to maintain itself in face of mass poverty.

Another piece of lying propaganda is the constant assertion that workers own large numbers of shares in public companies. Here, again, there is a part-truth in the statement, at least it is true that in most companies there are many shareholders who own only small blocks of shares. On the strength of this it is pretended by the defenders of capitalism that the shareholders are wholly or mainly wage-earners, and conveniently forgotten that even big investors habitually spread their investments over many companies, having only a comparatively small part in each. Even so, any proper examination gives a very different picture. Recently the Economist (December 5th, 1936) published an analysis of the shareholdings of ten big well-known companies, including Imperial Chemicals, Coats, Unilever. The figures show 442,720 shareholders (many of whom may be and are counted several times through having shares in more than one of the ten companies). The total number of shares or units of stock is 155,552,966, which makes the average holding £351 per person at par value. As many of the shares are now worth far above their original price, the present worth of the average is much more than £351, but even so the average holding would not appear very large. The significant part of the inquiry is, however, the further information as to the extent to which a few individuals own very large holdings of shares. A mere 193 shareholders hold between them 36,778,624 shares, that is about a quarter of the whole amount. These 193 shareholders are those who own upwards of 50,000 shares each. It was further found that 41.4 per cent. of the shareholders own less than 100 shares, 67.5 per cent, own less than 200, and 87.7 per cent, less than 500.

This is the true picture of capitalist monopoly—a picture the capitalists take care to hide from the working class. It need hardly be said that Germany, France, the British Dominions, etc., present a similar concentration of wealth. For example, the Journal of Electrical Workers of America (November, 1936) publishes figures brought out in a recent official inquiry concerning the great group of Bell Telephone companies. These companies make it their boast that their shares are widely held and that among the shareholders are large numbers of their own employees. The inquiry shows that there are, indeed, 657,465 shareholders, but the great majority of them own only very small amounts. There are 124,820 shareholders who are employees of the companies but their holding amounts to only 1,423,000 shares —an average of less than a dozen each! By contrast, at the top of the scale there are 957 wealthy individuals who own between them 3,156,803 shares, an average of 3,300 per person!

The lessons to be drawn are simple but important. The capitalists everywhere have an interest in hiding the facts of their own monopolistic ownership behind a screen of half-truths about the small shareholders. The workers have an interest in ending the system of society which rests on this class monopoly. In the meantime they have a duty to themselves in refusing to be deceived by the calculated misrepresentations of the capitalist Press.

Edgar Hardcastle