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November 22, 2011

The Corporate Welfare State

Source:  The Guardian

Despite the crisis, it’s still socialism for the 1%, capitalism for the rest.

By George Monbiot,

In the documentary series which finished on Friday evening, the heiress
Tamara Ecclestone set out to prove that she isn’t “a pointless, quite spoilt,
really stupid, vacuous, empty human being”(1). This endeavour was not
wholly successful. Channel 5 showed her supervising the refurbishment of
her £45m home in London, in which she commissioned a £1m bathtub carved
from Mexican crystal, an underground swimming pool complex, her own
nightclub, a lift for her Ferrari, a bowling alley with crystal-studded balls and
a spa and massage parlour for her five dogs, to save her the trouble of
taking them to Harrods to have their hair sprayed and their nails painted. But
there was something the series didn’t tell us: how much of this you helped to
pay for.

In court a fortnight ago, her father, the Formula One boss Bernie Ecclestone,
revealed that the fact that his family’s offshore trust, Bambino Holdings, was
controlled by his ex-wife rather than himself could have saved him “in
excess of £2bn” in tax(2). The name suggests that the trust could have
something to do with supporting his daughter’s attempt to follow the
teachings of St Francis of Assisi.

Ecclestone has also been adept at making use of the corporate welfare
state: the transfer by the government of wealth and power from the rest of
us to the 1%. After the mogul made a donation to Labour’s election fund,
Tony Blair demanded that Formula 1 be exempted from the EU’s ban on
tobacco sponsorship. The government built a new dual carriageway to his
racetrack at Silverstone(3).

In other countries his business has received massive state subsidies.
Russia, for example, has recently agreed to build a circuit for Mr Ecclestone,
and then charge itself $280m for the privilege of letting him use it(4).
Working in India in 2004, I came across the leaked minutes of a cabinet
meeting in which the consultancy McKinsey insisted that the desperately
poor state of Andhra Pradesh – where millions die of preventable diseases –
cough up £50-75m a year to support Formula 1. The minutes also revealed
that the state’s chief minister had lobbied the prime minister of India to
exempt Ecclestone’s business from the national ban on tobacco advertising

Socialism for the rich, capitalism for the poor: that is how our economies
work. Those at the bottom are subject to the rigours of the free market.
Those at the top are as pampered and protected as Tamara Ecclestone’s

On Tuesday the Chancellor, George Osborne, decided at last to review the
private finance initiative (PFI), under which the companies building public
infrastructure made stupendous profits while the state retained the risks(6).
But if you thought that Osborne’s decision represented a wider shift in
policy, you’ll be sorely disappointed. Two days later he agreed to sell the
state-owned bank Northern Rock to Richard Branson. Under the deal, the
state keeps the liabilities while Branson gets the assets: rather like PFI. The
loss equates to £13 for every taxpayer(7).

Someone who will not suffer unduly from being touched for £13 is Matt
Ridley. As chairman of Northern Rock, he was responsible, according to the
Treasury select committee, for the “high-risk, reckless business strategy”
which caused the first run on a British bank since 1878(8). Before he became
chairman, a position he appears to have inherited from his father, Matt
Ridley was one of this country’s fiercest exponents of laissez-faire
capitalism. He described government as “a self-seeking flea on the backs of
the more productive people of this world … governments do not run
countries, they parasitise them.”(9)

The self-seeking parasite bailed out his catastrophic attempt to put his ideas
into practice, to the tune of £27bn. What did the talented Mr Ridley learn
from this experience? The square root of nothing. He went on to publish a
book in which he excoriated the regulation of business by the state’s
“parasitic bureaucracy” and claimed that the market system makes self-
interest “thoroughly virtuous”(10).

Having done his best to bankrupt the blood-sucking state, he returned to his
family seat at Blagdon Hall, set in 15 square miles of farmland, where the
Ridleys live – non-parastically of course – on rents from their tenants, hand-
outs from the Common Agricultural Policy and fees from the estate’s
opencast coal mines(11). No one has been uncouth enough to mention the
idea that he might be surcharged for part of the £400m loss Northern Rock
has inflicted on the parasitic taxpayer. It’s not the 1% who have to carry the
costs of their cock-ups.

Even in the midst of this crisis, when the poor are being hammered on all
sides, the government still seeks to transfer their meagre resources to the
rich. Last month Vince Cable’s business department listed five employment
rules that businesses might wish to challenge. Among them were the
national minimum wage and statutory sick pay(12).

On Friday, David Cameron opened negotiations with Angela Merkel over the
Eurozone crisis. His two principal demands were that there should be no
Robin Hood tax on financial transactions and that the working time directive,
which prevents companies from exploiting their staff, should be renegotiated

Just as instructive was what he did not discuss. In fact, as far as I can tell,
none of the European leaders have yet mentioned it in their summits, even
though it accounts for almost half the EU’s spending. It is of course the
agricultural subsidy system, which now costs British taxpayers £3.6bn a year

We like to imagine that this money supports wizened shepherds who tie up
their trousers with bailer twine, but the major beneficiaries are people like
the Ridleys. The more land you own, the more support you receive from the
state. The Common Agricultural Policy is a massive state subsidy to the
richest people in Europe: the aristocrats and plutocrats who possess the big
holdings. British politicians pretend that it is protected only by the French.
This is bunkum: in February a House of Commons committee demanded not
only that the existing subsidy system be sustained but also that we should
reinstate headage payments, encouraging farmers to produce food nobody

Last week the Guardian exposed a system which looks like state-enforced
slavery. To qualify for the £53 a week they receive in Job Seekers’
Allowance, young people are being forced to work without pay for up to eight
weeks for companies such as Tesco, Poundland, Argos and Sainsbury’s(17).
Some of the nation’s poorest people, in other words, are being obliged by
the state to subsidise some of its richest businesses, by giving them their

For the corporate welfare queens installing their crystal baths, there is no
benefit cap, no obligation to work, in some cases no taxation. Limited
liability, offshore secrecy regimes, deregulation and government handouts
ensure that they bear none of the costs their class has inflicted on the rest
of us. They live at our expense, while disparaging the lesser mortals who
support them.









8. Treasury Select Committee, 2008. Fifth Report.


9. Matt Ridley, 22nd July 1996. Power to the people: we can’t do any worse
than government. The Daily Telegraph.

10. Matt Ridley, 2010. The Rational Optimist: how prosperity evolves. Fourth
Estate, London.





15. DEFRA press office, 31st August 2011. By email.

16. House of Commons Environment, Food and Rural Affairs Committee, 9th
February 2011. Farming in the Uplands. http://www.publications.parliament.