Why we must sear the sinister skin of modern capitalism in 2014

photo of a barbecue in the South African bush

Fire, food and an act of friendship in the South African bush led social investor James Perry to ask if we can force finance through the flames of change this new year

Reflecting on the year just ended, my mind kept returning to the experience of cooking on an open fire in the middle of nowhere in South Africa. I was there, a clueless Brit with my meat and my foil-wrapped potatoes. A friendly Afrikaner wandered over and asked me which spice mix I was using. I looked blankly back at him and he rolled his eyes and went to get his.

By the following evening, he and his friends had decided that we were helpless innocents and needed to learn about cooking in the bush. My family and I were invited to join them, and we were introduced to the magic of the traditional Afrikaner brai. A whole world opened up to us where centuries of wisdom and experience combined to create a wonderful, unique culinary culture: potjie, Rooikrans wood, vetkoek, dynastic spice mixes, unique condiments and even some vicious fire-water to help it go down. The contrast with the blandness of the barbecue that we would otherwise have been eating was striking. My ignorance has seldom been so plainly, charmingly and generously revealed to me.

This process of cooking and eating together in the bush requires time, patience and the application of ancient knowledge passed down through many generations. It was a memorably enriching experience.

Panahpur has made the transition from being a charitable foundation to being an investment company with a charitable purpose. We look to make financial investments which enrich society as well as ourselves, rather than having just a narrow financial purpose. To do so, we have no choice but to start to consider what is going on in the world of investment and finance.

This world of investment capital, in contrast to the world of Afrikaans bush living, has in the last 40 years been transformed by the information revolution. Time, patience and ancient wisdom have largely gone up in a big bang. Financial markets have become characterised instead by speed, impatience and the instant availability of unlimited knowledge. These ‘qualities’ are the new tools of the trade. Applying them, in the context of judgements made by natives of this narrow world, are what makes money. The wisdom of the ages is irrelevant – indeed, it is an inhibitor, offering a distraction from a fast and objective assessment of the current information being assessed by everyone else.

This leads investment to being the financial equivalent of my bland, ill-considered barbecue. It would meet the narrow, immediate needs of myself and my family. But it is a shallow and monochrome experience when juxtaposed with the deep nourishment of an authentic Afrikaans brai.

Investment decisions shape our world. They determine how we live as individuals, communities and nations. They are made by (or on behalf of) owners of capital, in the interests of accumulating more capital. Capitalism can only be justified if it is an efficient allocation system that enables supply to meet demand. Competition must deliver maximum consumer benefit. Without these things, capitalism loses its legitimacy and its appeal. Evidence suggests that this was broadly the experience whilst capital was decentralised, operating in a world of imperfect and slow communications.

But the experience is starting to change.

Capital is, and always was, ultimately self-serving. Two trends of the last ten years have created the conditions for a sinister new development in modern capitalism. The first is the communications revolution, enabling instant exchange of information and finance. The second is an accelerating concentration of capital into fewer and fewer hands.

Modern capitalism seems to be reaching a tipping point. Where in the 20th century it was a force of democratisation, might it be evolving into a source of disempowerment? Where it was a force for mass wealth creation, could it be becoming a force for mass exploitation? Where it was a force for freedom, is it starting to have a vested interest in repression?

In our information age, as capital has become concentrated into fewer hands, it becomes advantageous for it to create the conditions for domination - whether through oligopolistic operation in the utility markets, through tacit co-opting of political power, or through the creation of ever-bigger, irresistible companies swallowing everything before them.

One story of 2013 was the onward march of Amazon. First the independent traders had their lunch eaten by the supermarkets. Now the supermarkets are having their lunch eaten by Amazon. For employees, it has meant the descent from Granville Arkwright to shelf stacker to human drone. Market share is won, and big capital bears short-term losses in order to create the conditions for its domination of the market. Anyone showing the gumption to disrupt this onward march is acquired. It’s not just Amazon – this exercise of dominant power is becoming a feature of our age with emerging giants such as Google, Microsoft, Facebook, Apple et al adopting the same, effective modus operandi.

Consumers might benefit through lower prices. But will society benefit? Is there a connection between us as employees, members of community, a species living in the natural world – and our status as consumers? Is the lens that capitalism sees us through blind to anything but our consumer status? What does this mean for us as human beings?

As we enter 2014, the questions facing capitalism are becoming more fundamental and more pressing. It has created a vortex of returns-driven investment markets existing in a matrix of instant global information exchange. Its logical tendency to create the conditions for domination (through corporate gigantism and ever increasing barriers to entry) is ever more evident. And it is becoming increasingly apparent to us that we, our communities, our society and our planet are no more than fodder to feed these money-making machines. We are understood as consumers. But are we valued as a human race?

Perhaps it is naïve and romantic to think that the financial services industry, which shapes how we live, can somehow step out of this vortex. Perhaps it is fanciful to think that an investment product could put a value on time - for relationships, communities, wisdom and people themselves, for their intrinsic and infinite value. Perhaps it is fanciful to think that an investment product could be more like an Afrikaner brai than an English barbecue. Either way, modern capitalism urgently and deeply needs to engage with these questions if it is to avoid losing its legitimacy amongst human beings, people who see themselves as more than just consumers.

Maybe, if it doesn’t, human beings will start to use the new tools of the information age to organise and respond, using the one weapon that we have, which ultimately will assure us of victory: our money - both our savings and our consumption. Perhaps it is time for us all to rethink what we value, and to join together to wield the power of what is already ours.

It is good to live in interesting times. Happy New Year, one and all.