Sometimes I go on air having doing no prior thinking, and sometimes I prepare. I did for Jeremey Vine on BBC Radio 2 today. These were my notes as I prepared them:
The issue
- Some companies are struggling right now
- Others are doing very well
- The evidence is that very few companies were prepared for anything like this
- And yet we are critically dependent upon them
We need to react to the good and the struggling - because society is dependent upon both
- Some companies who are doing well - like supermarkets - did so because they did not hold the stocks required to face a crisis. We need to ask why
- Some are doing well because of what is in effect rationing - not letting us go out is a form of rationing. These companies include:
- Supermarkets
- Convenience stores
- Online retailers
- Subscription services for music, video and more
- Car insurers - because we're simply not going out
- Others are doing well because of the crisis itself
- Suppliers of PPE
- Some pharmaceutical companies
- Banks - who are being paid to hand out state-backed loans
- Some are doing well because of subsidies
- The supermarkets are getting rate rebates worth hundreds of millions of pounds at the same time as their sales are up a lot and special offers have disappeared
- There's a key idea here - that we are all in this together
- But are we if some profit at the expense of the rest of us?
- What can we do?
- One option is an excess profits tax - which we had from 1939 to 1945. There is good reason to think one might be needed - and to enact it now as a precautionary measure
- But we also need to
- Make sure these companies really do pay the tax that they owe
- They must put a full explanation for their tax affairs - country by country so that we can see what they do where, including in tax havens, on public record, and they must offer explanation
- Bank executive pay rises from profits for them coronavirus crisis
- Require that profits be invested in making these companies sustainable rather than paying excess dividends o paying for share buybacks
- Require that these companies be better prepared for crises in future
- For example, supermarkets and PPE companies should hold more stock of critical and long shelf life items
- Demand that companies keep more funds so that they can all face crises better in the future - the evidence I am looking at is that many have paid out all their earnings in the last ten years and left nothing in their companies to fund investment - and that has left them deeply vulnerable
- And we need to make sure that this does not happen again
- Everything has to change: including companies
- We've accepted that their only duty is to make profit
- But right now we've found that when the chips are down what we need are essential services
- We need essential companies too - ones that are resilient enough to survive
- We can have them but that needs change to company law and accounting
- But if we don't do this when the next crisis comes along - the climate crisis - business will not be ready - and that one is much bigger than this
- So reform to make sure companies can survive much bigger stress than they have shown that they are capable of doing now is essential if business is going to play the essential role that it must in our society in the future
Of course, the whole point of preparation is to have thought things through and then be ready for something completely different to come up, but on this occasion it went pretty much to plan.
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Good luck.
Do you know if you up against an ‘opposing view’ and it might be?
It’s been done….and no, I was not
I think this represents a lost opportunity Richard. As you say, “We need essential companies too – ones that are resilient enough to survive” … but if we leave that to private enterprise, then all it takes is one set of bad managers or risk-taking decisions or shareholders who take the profit out of the company and leave it vulnerable to the shock, then these firms will not be here when we need them. The radical solution must be to take more essential services, such as the provision of PPE and food, yes even toilet rolls, into state control. This would be far more courageous and would prevent such shortages ever happening again! It also solves the problem of private firms operating in these sectors ever making excessive profits in times of crisis!
“Some companies who are doing well – like supermarkets – did so because they did not hold the stocks required to face a crisis. We need to ask why”
A lot of it was wholly unnecessary panic buying by the public, though. Most of it was completely irrational. That’s the public’s fault, not the supermarkets’.
Apart from tissues, wipes, hand sanitisers etc, I am struggling to think of many supermarket products where there should have been a genuine increase in demand. The demand for pasta, bread, rice, eggs, bog paper etc. was wholly unwarranted.
Ian
If you do not understand the concept of reserve stocks then you really understand very little indeed
My suggestion is you go away and learn a great deal before coming here again
Richard
But Richard, can we ever trust private corporations to hold emergency reserve stocks when this is less “profitable” in ordinary times than JIT supply chains? I doubt regulation can be enough. We need a National Food Service and explicit pro-health rationing. If for the last decade service-users at food outlets had been met at the checkout not by poorly paid barcode-scanners and change-givers but by an army of trained nutritional professionals then we could have largely eliminated the public health threat of obesity whereas private supermarkets profit from selling junk. Had we controlled obesity then thousands of COVID deaths would have been prevented – not to mention heart failure and diabetes.
Switzerland does this
Why can’t we
250 companies are covered there and have to hold strategic reserves
I would be satisfied with that provided the stockpiles were taxed appropriately but it doesn’t solve long term issues of food poverty and also obesity-very prevalent in Zurich especially!-which reduce population resilience to new health challenges. Having a supply of food available is not enough, it needs to be good food (healthwise) and the population must have received a nutritionally balanced diet for the previous decades. Every overweight and underweight person without medical cause is a death statistic waiting to happen and each one is living proof that capitalist organizations cannot be trusted to run our supermarkets or restaurants.
Can I be clear that we are all a death statistic waiting to happen.
By the time you’re 62 you know that….