STOP FIGHTING THE LAST WAR

Trade unions can extend their reach beyond the industrial class struggle to act as a counter-force to global finance.

The entrance of British, European and Trans-Atlantic trades unions as campaigners against the excesses of global capital and for the interests of employees deserves a few plaudits. Why? Because nobody else is representing the interests of ordinary employees, pension-owners and savers.
This website started from the author's direct experience of the growing problems caused to large quoted companies by public equity investors.

Stock market investors' have failed to support high performance

Over a couple of decades, investors became increasingly oppressive, foisting their needs to maximise the performance of their portfolios on to individual companies, with no care for their longer term interests. Again, from direct experience, investors and analysts were in the main concerned with speculating on share price movements with little or no understanding of the challenges of managing complex enterprises to optimise their long-term performance. The growing impact of investors' ignorance, speculation and short-termism has had a terrible effect on the long-term performance of FTSE 100 companies. (See FTSE 100 in this site). This below par performance can be measured in low growth in profits and sales, pathetic levels of investment and the failure to achieve significant growth in employment. This has been accompanied by a high rate of company failure and sale to foreign buyers.
Low performance has been accompanied by a huge growth in dividends to investors, at the cost of corporate investment, and the well-known excesses in executive pay. In this regard, it can be argued that investors and managers are colluding to maximise their rewards at the expense of the survival of companies and the interests of customers and employees.
Has this slow motion national disaster attracted any consistent attention from politicians? Mainly not - as the political mainstream is either too timid to resist the bullying of big finance or too much in the pockets of the financial community. (See Webs of influence, politicians and the finance industry).

Private equity and hedge funds will make matters worse

Now we are faced by another challenge to the well-being of UK industry - the private equity and hedge fund industries. Currently, there is much ignorant and inaccurate comment about these industries, conducted at a high pitch.
Let us clarify and explain - there are two types of private equity that can be entirely healthy - venture capital investment for start-ups and that aimed at helping smaller companies to grow. The intent behind this kind of investment is to nurture companies to grow and thus create value.
Alas, this is a tiny part of the private equity market. The massive growth in private equity has come from investors who buy mature companies in the expectation that they can extract value from them by cost reduction, loading them with massive debt and selling their asset bases. This is the third kind of private equity.
The intent behind this investment type is to extract maximum returns for a relatively small number of equity holders, mainly the equity investors and company managers.

Those who support the borrowings (banks, pension schemes etc) are on the hind teat - the really juicy rewards go to a relatively small in-group. Supporters of private equity argue that employees also benefit - one recently commented with approval that employees of Saga would each receive £10,500 if the current private equity deal was consummated - compared with the £100,000,000 to be received by the CEO.
Our position in relation to hedge fund speculation and private equity investment of the third kind is very sceptical - it seems to us that the long term health of companies and the interests of their customers and employees are quite secondary to the short-term (5years) expectations of extracting very high returns. The row about tax is peripheral, the rates of long-term investment in growing companies by comparison with non-UK levels is the key - and the evidence is that private equity of the third kind is more interested in extracting value than investing for the long term. (Long term for a largish company is 10 years+, but healthy companies do not put artificial timescales on investment - it depends on such factors as industry, technology and scale).

Who is going to stand against the speculators?

So the position of this website is quite simple:

• Public equity investors have, in conjunction with managers, ruined large swathes of UK industry
• Private equity investors and hedge funds are in the main, even more rapacious and short term in their focus than public equity investors and will therefore have even more damaging long term effects.

Governments seem to be like rabbits in the headlamps when it comes to acting to protect the national industrial interests and those of savers, pension holders and employees. Many senior politicians are effectively bought by financial support or the lure of future riches from the finance sector. Therefore there is a need for a countervailing and powerful force to those of the investment industries and the only one on the horizon seems to be the trades unions.

A wider role for trade unionism?

At present, Trade Unions are disadvantaged by their past histories and their public images. It is encouraging to see international collaboration by unions - capital is already global in the form of the massive investment banks and big corporations.
But there is currently a great opportunity for the unions to metamorphose into something much more potent. Currently, many union members are also members of pension funds and many more have savings and mortgages. In this regard, it is possible to cast the unions as the representatives of more real shareholders than any other institutions. By 'real shareholders' we mean those who are the ultimate stakeholders in the economy and the actual owners of savings and pensions. The finance industry are agents and intermediaries, but have arrogantly and inaccurately assumed the roles of owners and shareholders. Let us say it again - they are not, they are agents of the real capital owners, who for a complex of reasons, get little or no say in what happens to their money unless they are very rich.
These real owners, the millions of small savers and pension fund members need a strong voice and don't have one. This is a void into which the unions could migrate, if they are intelligent about it.

How to progress

Unions need to drop their working class images and appeal directly to a new class of member - those who need a voice to counterbalance the massive power of the finance industries. Such people are mostly customers of the financial services industries, employees whose security and well-being is adversely affected by uncaring investors and companies, and people, like the writer, who are concerned about the future competitiveness of the UK economy.
Right now, the unions and the TUC and its European counterpart the ETUC are light years from being able to fill the void - both representative bodies need for a start to have formidable research capabilities, up to the standards of the best think-tanks and be able to project an image of classlessness in order to attract people who have historically regarded unions as the enemy.
There is nothing to stop the trade union movement branching out into setting up investment funds to encourage new ventures - this already happens in North America. (See www.usw.ca/programs/content/946.php)
The opportunity is there, there are few competitors, and a lot rides on creating strong counterbalances to global industry and capital.
Can unions rise to the challenge - has anyone the vision to grasp the opportunity?