BHS and capitalism’s moral compass

The BHS and Sports Direct sagas have raised the question: is UK capitalism in a uniquely scuzzy phase? I am inclined to say that it isn’t but that anyway capitalism has many forms ranging from the decent to the near-criminal; from the paternalist to the devil-may-care.  The problem for society is how to regulate the intolerably bad bits without killing the vigour some quite dodgy chancers (none of those invoved in the sagas in question have been proved to be so) bring to the economic table.


The men (and women) who have owned BHS (in recent years), and Sports Direct are not in the image of the tightly-furled, let alone the top-hatted, capitalists of yore. They do not obviously seem to be old-style paternalists or even hide-bound professionals; nor yet people for whom midde class respectability is a huge driver.

I have written a good deal about how the upper echelons amongst large-scale capitalist operations let us and themselves down. I have also written about the failure to regulate them well. Here I am on Establishment failures; on why greed is good; and how The City let capitalism down.

My top line is that, to paraphrase Bernard Henri-Levy, the banking crash was not a case of capitalism letting us down, but of people letting capitalism down. I go a little further: in the case of the financial industries, smart, high-end, institutional capitalists let us down. They did not behave in the traditon of professionalism. But the regulators, the media and plenty of others also let themselves – and us – down.

Now, it is the other end of capitalism which is under the spotlight. And in this sort of case, it is not sensible to expect the capiatlist players to be highly professional in the pro bono sense. Efficient, vigorous, greedy, law-abiding, yes. But not much more. That, however, simply makes it all the more necessary that they be cleverly regulated.

One difficulty in spreading decency through regulating them is clear: the more they must pay minimum wages or deliver broadening employee rights, the more they find themselves working out how to game the rules or seek loopholes. That they do so is not an argument against regulation. It is the cleverness of reguation which matters.

Still. Beware what one might call The Regulators’ Curse: rules almost invite rule-dodging, and a sort of arms race can ensue.

It may be that the various investigative processes now under way will show one or other of them to be plain criminal in the way they have conducted themselves. Just as likely is that one or other will be shown to be more purely selfish, or more solely in the property game, or keen to exploit pensions law, than is good for the sensible business of these firms, which is or was retailing, or for society.

If this informal, moral and unenforceable censure happens, it will be moot how to rein in such behaviour in future.

However bad the news is, my overriding point is that it doesn’t much matter to the well-being of capitalism or society that there are chancers about. Entrepreneurs come in all forms, and from – as it were – street traders to bond traders, and from spivs to do-gooders, they are all capable of bringing vigour to the process.

I do not think we can tame, harnass, or socialise capitalism wisely by making it begin with respectability or even constructiveness. The owner of a frm can’t sensibly be required to organise it in such aw way that it will last forever; on the other hand he or she can’t be allowed to plunder it into extinction.

It follows that we need to define the border between the tolerated vigours and rigours of capitalism and the outlowed extremes of wildness, and work out how to police the line between the two. So the issue isn’t just to expose the workings of the “lower” end of capitalism and to have a witchunt against the types who epitomise it.

Rather, we should use such men and women as decent cases in point as we work out how it was that legislators and regulators have not done a good enough job in helping to design and form a framework in which society is kept safe from the worst effects of the rigour and vigour of capitalism.

In short, let’s not worry too much that there are certainly near-crooks seeking to become capitalists. What we should be busy about is finding the silver bullets which can police the system without maiming it.

This is, by the way, the business of select committees of the House of Commons.  Whenever they look like the Star Chamber – interrogating citizens, say – they are not doing their main job, which is to interrogate arms of government. This last is where the failings really lie.

So far the Business and Work and Pensions select committees of the House of Commons seem to have done a fairly decent job in looking at the BHS issue. We will only know just how successful they have been when we see how well they report. Signs to look for will be: how much dirt remains under how many carpets which they couldn’t get at, and do they bame or exonerate the right people. The biggest sign will be whether they get right the balance between criticising the entrepreneurs involved; the legislators who write the laws which frame them; the regulators who police the laws; the professions who advise and in some cases sanction the entrepreneurs and are supposed – sometimes statutorily – to marry decency with business.

One biggish issue I should like to understand far better: why do firms “have” “their own” pension funds, if they do? Why not simply insist employed people buy a third-party pension fund and maybe insist firms contribute to them? The present BHS row seems to show that the firm’s pension fund was neither sufficiently sufficiently a matter for the retailer nor for the pensions industry. Put it another way: BHS’s owners seem to be in the dock for a fund the law insisted they didn’t control.




Paul Seaman
Richard, I agree with much of your analysis, though I'd have been a little tougher on the Business and Pensions select committees. Whenever anything goes belly up there's a temptation to look for scapegoats. The buzz about BHS suggests that if it wasn't for Sir Philip everything at BHS would be fine. This finger-pointing ignores that his entire career has been largely a commercial success that has benefited millions of consumers, thousands of workers, many suppliers and his shareholders, which, yes, include his family. The blame game also ignores the fact that two thirds of final pension benefit schemes are in deficit and that much of the problem boils down to regulatory limitations on fund management and global stagnant economic growth. Meanwhile, some of the same parliamentarians who bashed Sir Philip were not above advocating passing special legislation to reduce the pension liabilities of Tata Steel in Wales to make the company attractive to a buyer. Ironically, parliamentarians trashed the reputation of the owner of Sports Direct one day - over a matter he admitted had some validity - and then days later attacked Sir Philip for not having sold BHS to Mike Ashley, the owner of Sports Direct. Sir Philip has now offered to help sort out that part of the mess that he accepts responsibility for by injecting cash into the pension fund. Sir Philip may not be a saint but this witch hunt sucks.

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Publication date

15 June 2016