BOOK REVIEW: The New Few: Or a Very British Oligarchy
WHEN Britons use the word "oligarch" these days, we think of the caste of knuckle-cracking hard-nosed entrepreneurs that rose to wealth and power after the break-up of the Soviet Union: super-rich, politically potent, scary — and deeply un-British.
But is oligarchy really so foreign to us? Not according to the political commentator Ferdinand Mount. In his provocative and succinct new book The New Few: Or a Very British Oligarchy, he argues that for the past 30 years we have been "hatching our own oligarchs" right here in Britain. Almost without our noticing it, Mount says, power and wealth have "started to migrate into the hands of a relatively small elite".
Mount’s views have a special piquancy as he himself belongs to a very distinct elite. An Eton-and Oxford-educated baronet who happens to be related to David Cameron by marriage, he has impeccable Conservative credentials, having run the Number 10 Policy Unit under Margaret Thatcher and headed the right-wing Centre for Policy Studies in the 1980s.
Some might consequently be tempted to dismiss his views as sour grapes. After all, was the old magic circle any better than the new one? But Mount makes a powerful case that the recent changes go beyond simple switches of personnel at the top. They threaten not only the good name of capitalism but the integrity of Britain’s democracy too.
Few would deny that Britain has become a more unequal society in the past three decades. While pay has stagnated for employees, it has rocketed for those in the "executive suite". Top company bosses who received 45 times the average employee’s wage in 1998 had jacked this up to 120 times by 2010. The financial crisis has exploded the old argument that the increases were down to improving performance. As Mount points out, while the FTSE all-share index fell by 30% between 2000 and 2008, "cash payments to executives increased 80%".
What interests Mount is the way this business class has managed to seize control of companies and extract such vast rents from them, almost irrespective of the wishes of their owners. The answer, he suggests, is to be found in a basic flaw of shareholder capitalism. The inevitable dispersal of ownership that occurs in widely-held listed companies leads ineluctably to the entrenchment of management power.
This "principal-agent" problem has only deepened with the decline of the individual shareholder and his replacement by money managers who are naturally sympathetic to executives. I should at this point declare an interest as Mount quotes my description, from a 2008 FT article on the City, of the "croupier’s take" by which this middle-man’s tax is collected.
Freed from the tiresome constraints of shareholders, the only limits on pay are those imposed by executives on themselves. But, as Mount points out, "a director who regularly votes for the lowest plausible pay rise for his colleagues is unlikely to prosper. He is the equivalent of the man who never stands his round or the journalist on expenses who never signs the restaurant bill for his colleagues’ lunch".
Nor is the bonus culture confined to quoted companies. Increasingly, the public sector has hopped on to the band-wagon, pushing up salaries and importing the concept of performance-related pay. This has even trickled down to bodies such as the National Treatment Agency for Substance Abuse, where three directors received near-20% pay rises in 2009 because of such awards. "Isn’t there something a bit sad about importing the bonus culture into such a redemptive business as getting people off drugs?" Mount asks.
Mount’s critique of oligarchy goes beyond business. Just as shareholders have lost their grip on companies, the voters have become disconnected from politicians. The decline of interest in party politics is everywhere evident. Mass membership of political parties has collapsed. In the 1950s, Britain’s two main parties had more than 7-million members between them. Now it is perhaps 400,000. Turnout in elections has slumped.
Yet it is a myth that the British people are apathetic about all politics. They still march for and against the great issues of the day, whether the Iraq war or spending cuts. As Mount sees it, the problem is more that power has become "separated from the electoral process". It operates at such a remote level — through the European Union, "sofa government" and a parliament utterly dominated by the executive — that the public has rationally concluded it "can have little influence, whether as party members or voters".
If this has hollowed out national British politics, the rot has spread even further in Britain’s local government. What was in its Victorian pomp a dynamic force for social improvement has been drained of revenue-raising powers and autonomy. One of the biggest blows — rate-capping — was actually administered on Mount’s watch in Downing Street. To his credit, he is properly ashamed.
Whitehall and its agents increasingly intrude into every nook and cranny of local life. Mount gives the example of High Bickington, a village in Devon, which had put forward a scheme to build some new housing, a civic centre and a school. Although supported by the local community, the district and county councils, the scheme was ultimately killed off because of the intervention of a regional quango — the unelected Government Office for the South West.
Organisations such as these are, in Mount’s view, the true face of the modern oligarchy. Quangocrats, he observes, "like to describe themselves as stakeholders but their position really corresponds to the well-connected personages in the 18th century who held public sinecures".
In linking the bonus culture and the hollowing-out of public life, Mount is making an important point: we, the people, have sleepwalked into these changes, lulled by rhetoric about incentives and performance indicators. But the course towards full oligarchy is not pre-ordained. "We make our own destiny and we can unmake it if we want to," he says.
But do we? Mount offers some suggestions that might counteract oligarchy. Shareholders must get a firmer grip on companies — perhaps through the use of technology — while the House of Commons must kick back against the executive through the select committee system. Local politics should be revived. It is an activist agenda and the counter attackers will need to be dogged.
Oligarchy has become encrusted over the decades and scrubbing it off will take years more. But if this elegant book encourages a few more people to try, it will have done much good.
© 2012 The Financial Times Ltd
More in this section
- Guptagate report shows manipulation, collusion and illegal blue lights
- SABC presenter Mbuli hailed as patriot and ‘zealous newshound’
- Eskom was ‘on the brink of a power shutdown’
- Karabus lawyer says South African nurse behind bars in UAE
- Iran ‘behind US cyber blitz’
- THICK END OF THE WEDGE: We can already write the NDP off