Capitalism under fire as major chain implodes
The clothing chain BHS has gone bankrupt, putting 11,000 people out of work. Meanwhile, Sports Direct employees face stress, low pay and fear. Are these signs of systemic failure?
‘If you buy my house and it falls down, is it my fault?’
So asked Sir Philip Green, the former owner of BHS, when the company went into administration in April. This week attempts to rescue the company failed and one of its staff answered his question: ‘I’ve just lost my job and it’s down to Philip Green. Cheers pal.’
There will be 11,000 job losses as 163 stores close. BHS’s landlords and suppliers will lose money. UK businesses will bear the cost of the BHS pension scheme.
With Green at the helm, BHS paid to him and his family some £180m in rent and interest and £400m in dividends, mainly to his wife, the registered share owner, who living in the tax haven of Monaco paid no UK income tax. Subsequently the chain made major losses and ran a huge deficit on its pension scheme.
In March 2015, Green sold BHS for £1 to Dominic Chappell, who had been made personally insolvent three times. Chappell’s senior staff now say he was a ‘premier league liar and Sunday pub league retailer’ who issued a death threat and took excessive amounts of company money for his personal use.
Sports Direct owner Mike Ashley allegedly tried to save BHS. But this week his own unscrupulous business practices were under scrutiny.
Staff at Ashley’s company’s warehouse were paid less than the minimum wage and docked 15 minutes’ pay if they arrived one minute late. Employees have described an atmosphere of fear and stress, with reportedly 110 ambulance call-outs to the warehouse.
Some argue such problems are inherent in the capitalist economic system, which encourages people to make money and trade freely. Critics such as Thomas Piketty and Paul Mason say it encourages short-termist, individualistic behaviour — epitomised by the 2008 global economic crash, which left millions unemployed, homeless or worse off.
Since the crash, these thinkers have become more popular. Support has surged for socialist politicians such as Jeremy Corbyn and Bernie Sanders. Suspicion of the free market has risen, even in staunchly capitalist countries.
Are BHS and Sports Direct’s woes more nails in capitalism’s coffin?
To cap it all
Yes, say critics. Capitalism values people only for the profit they make. Those with money can speculate with others’ futures in the hope of making more; those without it must accept insecurity and instability. In capitalist societies, we can act free of control or principle — making selfishness and avarice inevitable.
No, say defenders. Capitalism has improved living standards all around the world. And with no better alternative, the successful nations are capitalist. Freedom of choice means accepting people will make some bad choices — and must be held to account individually.
- Which do you tend to blame for the problems you care about: systems, or individuals?
- Is capitalism failing?
- Work in pairs. Person 1 is an employer, and person 2 is an employee, in a new country which has not yet created any laws. Write a letter each to the government, saying what you want them to do. Then discuss: what should the solution be?
- In groups of four, research and write a three-minute sketch about an important moment in the history of capitalism. Use the video under Become An Expert to help.
Some People Say...
“All property is theft.”
What do you think?
Q & A
- The men in suits are arguing. Who cares?
- This is only partly about arguments between some unscrupulous — and at times incompetent — people in the world of retail. Employment problems affect everyone. If 11,000 people lose their jobs, that causes major problems for them and their families. That could happen to someone you know. It also means these people, and those affected in other ways, will have less to spend. This makes everyone poorer.
- So what has capitalism ever done for me?
- The answer to that is highly contentious. Its supporters say it harnesses our natural instinct to be individualistic. Nobody claims it is perfect, but the material wealth around you is the result of a capitalist system. But its opponents say it is also the cause of poverty and suffering in the world around you.
- Pension scheme
- 20,000 BHS pensions have transferred into the Pension Protection Fund, set up by the government to protect pensions and subsidised by a levy on all UK businesses.
- BHS lost £70m in 2013.
- The difference between its liabilities, the money it must pay out, and the value of its assets. It was valued as £571m earlier this year.
- Death threat
- Ex-chief executive Darren Topp said Chappell ‘threatened to kill’ him. Chappell denies this.
- Personal use
- Particular suspicion surrounds his decision to transfer £1.5m out of the company to Sweden.
- According to the trade union Unite. In 38 cases, workers had complained of chest pains; in one, a woman gave birth in the toilets.
- Socialists prioritise equality and call for government intervention in economic and industrial affairs.
- In a YouGov survey in November, 14% in the USA, 15% in Germany and 19% in the UK agreed that ‘the next generation will probably be richer, safer and healthier than the last.’ Seven countries were polled; India was the most optimistic, as 50% agreed with the statement.