The Financial Tapeworm

Arthur Rothwell
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The parasitic financial services industry and its wealthiest plutocratic clients can be likened to a tapeworm that lives and thrives within the body of its host, but cannot afford to kill it by excessive greed. Without wishing to stretch the metaphor too far, I feel it can be used in the context of the current debate on inequality.

One of the symptoms of being host to a tapeworm is feeling weak. Weakness is certainly a feature of the current global economic situation, with GDP actually shrinking in formerly steadily-growing countries like Brazil. The remedy prescribed in the financial columns for the suffering of the poor is invariably growth, rather than redistribution, which is dismissed as politically impossible. Sure, the apologist argument goes, the rich get richer (the rich are always with us), but the increased wealth will trickle down eventually to the poor, even if in recent years a growing percentage has been steadily trickling up to the richest 1%. Harping on inequality, they say, is just the politics of envy getting in the way of wealth creators.

Who is losing?

Rarely do the very rich and their admiring media distinguish between creating wealth – which virtually all claim to do – and merely transferring wealth – which is more often the case. This is revealed only by occasional economists’ comments on a zero-sum situation as, for example, when banks’ investment arms manipulate or speculate on the stock market. When nearly all the investment banks make huge profits by transferring wealth in a zero-sum stagnant market, who is losing? Presumably other investors, such as the pension funds of us 99%. Funds managed by whom, I wonder?

The fact that the custom of the many overseas losers on the London stock market helps our balance of trade does not justify unquestioning patriotic pride in our dynamic, prospering financial services, ever ready to create innovative financial instruments to facilitate the capital flow so vital for a healthy world economy – for which read ‘tapeworm’. Even when financial manipulators make disastrous miscalculations, as Lehman Brothers famously did in the most recent big crash in 2008, none of the ‘elite’ involved seem to become poor in the sense that their millions of unwitting victims understand the word.

Despite the nauseating robustness of this elitist tapeworm, its greatest harm lies not in the resources it consumes, but in its debilitating effect on economic prosperity for the rest of us. In this respect, it is a sophisticated version of parasitic protection rackets and government corruption in countries around the world – but, of course, with much better public relations.

Debilitating Effects

Financial power dictates spending, so houses do not get built because the people who need them lack the money to buy or even rent them. The distorting effect of an artificial scarcity of land for building arises from another unproductive aspect of wealth: ownership of space. It provides huge capital gains for simply holding property in certain locations, independently from the buildings on it. This is widely accepted by the public because of the carrot of one day owning their own home with untaxed capital gains, but they are enmeshed in a slow-motion pyramid scheme that makes houses increasingly expensive and periodically ends in tears when the property market crashes. Crashes fatten the tapeworm by transferring wealth upwards to the rich, who cheerfully accept the 'vagaries' of the property cycle, manipulated largely by banks and governments managing interest rates.

Those aspiring to get on the property ladder invariably dream of climbing up it rather than down it. They may be criticized for being gullible and hoping to make some money without actually working (perish the thought!) but, even when they know it is crooked, after all it's the only game in town if they want a safe roof over their heads. We should not be surprised that many seem curiously ungrateful for living in a competitive market economy where, supposedly, consumer choice is paramount and we are free from dirigiste interference by the State. Whatever the mechanism, unearned income through property trading clearly forms part of a balanced diet for the tapeworm.

The guiding principle seems to be that no economic sector should be exempt from the 'commission' collected by the tapeworm. Nation-wide organizations providing basic essentials such as energy, water, waste disposal, communications and postal services may be set up and guaranteed by the State during the risky initial phases. However, once flourishing with their own valuable assets, they can then be privatised to enjoy the much-vaunted efficiency produced by the profit motive. The same applies to mutual organizations like building societies and car owners' services. The crowning accolade is to be welcomed to the stock market, the ber-tapeworm.

A critical debilitating economic effect when private wealth calls the shots in education is the worsening shortage of trained brains, particularly in the UK. Our ruling elite has preserved a semblance of good, if narrow, education for its own families. However, decades of deteriorating State education have failed to produce a broadly literate, numerate and IT-competent workforce ready for employment, threatening another component of the tapeworm's balanced diet. Never mind! Globalization offers to fill the gap by providing immigrants educated at another country’s expense and the social consequences won't show up for years on the bottom line.

The idealistic educational vision of a cultured citizenry – enjoying our international heritage of literature, music and art – has become a receding aspiration, despite the emergence of a low-cost cultural cornucopia on the web. It remains to be seen whether an underclass – ignorant in one sense, but well aware of grotesque social inequality – can be placated into bovine dependency, as portrayed in Wells's The Time Machine, or successfully segregated in their crime and drugs. Ideally, they would be educated into political involvement.

One final twist of the tapeworm analogy relates to how it reproduces, by excreting eggs that infest fresh organisms, even if the parent worm dies or kills its own host. The parallel now ends, as the spread of financial power has consolidated itself globally over the centuries until it has nearly run out of fresh host organisms. With the globalisation that it so enthusiastically espouses, the financial tapeworm is approaching a total monopoly that ultimately threatens its very existence by killing its host.

The Way Forward

Of course, this is not a criticism of those successful entrepreneurs who get immensely rich by actually inventing and making something, like James Dyson and his vacuum cleaners. Likewise, it is no criticism of those inventing revolutionary services whose consequences even they themselves cannot fully foresee, such as the creators of sharing enterprises and social media. Though they belong to the elite 1%, they did not create the economic system and individually often show signs of a social conscience and a genuine belief in free speech that clash sharply with the behaviour of traditional media moguls.

Indeed, our best hope of breaking the pathologically insatiable grip of the 1% on the world economy is the manifold burgeoning of free speech and global awareness resulting from the internet, and social networks in particular, created by entrepreneurs. Ironically, these are largely funded by advertising, much of which plays on our most selfish instincts and forms part of the aforementioned successful public relations. Let’s hope they continue to elude control by governments.

These comments in Economania – the newsletter of the Economics, Finance & Trade SIG – clearly and unapologetically stem from a set of political values. All forms of understanding society are intertwined, being differentiated purely for academic convenience. At university, I switched from Economics to Psychology in an effort to better understand the world, but now wonder if the most fundamental discipline of all might not be the study of power, so-called Political Science. Will it ever become more than an oxymoron? 

Permission granted to freely distribute this article for non-commercial purposes if attributed to Arthur Rothwell, unedited and copied in full, including this notice.

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