finance - delivering nightmares
WORKERS, SEPTEMBER 2003 ISSUE
The accountancy group KPMG International and the think-tank CREATE have produced a report on how the British fund management business operated in the 1990s, its present state and its future direction. Entitled Revolutionary shifts, evolutionary responses: global investment management in the 2000s*, it is based on the views of the senior executives of 185 investment management firms from 20 countries.
The longest bull market in 70 years ended when the dot.com bubble burst in March 2000, followed in quick succession by the Enron and WorldCom scandals and the destruction of Marconi. As a result of the stock market crash, "millions lost billions". European company pension funds now have a shortfall of £350 billion in their assets, and individual investors lost £175 billion. Now, there is the longest bear market - slump - since 1945, which will continue "at least until 2005".
The report says: "The 'sacred cow' of pay and bonus is long overdue for a radical rethink; greed can destroy the economy of any business." Quick, aren't they! Managers said that firms must change or "face terminal decline" and "it's all insane".
The report sums up: "The results have been catastrophic. Never have so many lost so much in so short a time. The breadth and depth of the resulting disillusionment amongst investors have no precedents in the post-War period. It was a crushing end of a dream for a generation who had been enticed to believe that stock markets had the magical power to do what governments could not: deliver decent retirement pensions."
Capitalism indeed cannot "deliver decent retirement pensions". One of the authors, Professor Rajan of Exeter University, said: "Governments encouraged people to plan for their retirement without ensuring that their funds had the capacity to deliver."
As one manager admitted, "We sold dreams and delivered nightmares." Capitalists dream of value produced without workers: worship of the stock market is a modern version of the cargo-cult. Another manager admitted, "everyone is praying for the markets to recover".
If workers are going to ensure that we have adequate pensions, we will have to take responsibility for the wealth that we produce, and make sure that enough of it is used to provide security for our old age.
*The text of the report is available from www.kpmg.co.uk.