On entirely misunderstanding the mechanics of capitalism


We'd just like to offer our congratulations, once again, to the founder of Corbynomics, Richard Murphy. Congratulations on managing to entirely misunderstand the methods of capitalism and the implications of bankruptcy. Here he is worrying about the possibility of a system of care homes going bankrupt:

The extent of the crisis at Four Seasons, Britain’s largest care home provider, was underscored on Thursday when it appointed advisers to carry out an emergency review of its finances. And:

Four Seasons, which has 22,500 beds in 470 homes, is weighed down by annual interest payments of £50m and debts of more than £500m — meaning it is making less money than it needs to service bondholders.

So, we have another private sector out-sourcing disaster in the making impacting on an enormous number of vulnerable people and their families.

When will we realise that care of the elderly is not something for which the market has any easy solution whether it concerns care or pensions? Deep financialisation and the provision of essential social solutions just do not mix in either case. But I expect the same old excuses to be rolled out this time as in the past.

One day we might have a government with the courage to admit that this is a problem for all of us. Until the problems will keep on coming.

The potential bankruptcy of Four Seasons (we have absolutely no idea what their financial situation is at all, we're only going on the evidence provided by Murphy) is in no manner an outsourcing disaster. It may not be all that much fun for either shareholders or bondholders but it will make very little difference to anyone else, including those elderly people currently living in those homes.

For we've seen this movie before, when Southern Cross went down. Management messed up their financing, the company went bust. But the homes carried on existing, those elderly people carried on living in them, being cared for by the same staff as before. For capitalism is a system which describes who owns things. And bankruptcy is the method by which transfer of such assets (ie, care homes, contracts with people to live in them, with staff to aid them in doing so) are transferred from one group of owners who screw up to others who may do better.

As far as anyone knows there wasn't even a case of one single cup of nice hot tea not being served as a result of that Southern Cross bankruptcy. And there's not a shred of evidence that anything different will happen in any other future such event. Simply because investors who choose the wrong management lose their money. This is how it should be, this is how the system works. And bankruptcy is the process by which we ensure that it does.

Quite why the transfer of a group of assets from possibly erroneous or not very good management to that of some other group of people is a disaster we're really not sure. Perhaps Jezza, with the aid of his adviser, will be able to explain it all to us one day from the Dispatch Box.