Why are we not rioting on the streets?

phones4uWriting in that bastion of free-market conservatism, The Daily Telegraph, Alex Proud looks at the recent collapse of Phones 4U, and asks why aren’t the British middle-classes staging a revolution? He paints a grim picture of the endgame of late-stage capitalism.

Phones4U was bought by the private equity house, BC Partners, in 2011 for £200m. BC then borrowed £205m and, having saddled the company with vast amounts of debt, paid themselves a dividend of £223m. Crippled by debt, the company has now collapsed into administration.

The people who crippled it have walked away with nearly £20m million, while 5,600 people face losing their jobs. The taxman may also be stiffed on £90m in unpaid VAT and PAYE. It’s like a version of 1987’s Wall Street on steroids, the difference being that Gordon Gecko wins at the end and everyone shrugs and says, “Well, it’s not ideal, but really we need guys like him.”

I’m not financially sophisticated enough to understand the labyrinthine ins and outs of private equity deals. But I don’t think I need to be. Here, my relative ignorance is actually a plus. You took a viable company, ran up ridiculous levels of debt, paid yourselves millions and then walked away, leaving unemployment and unpaid tax bills in your wake. What’s to understand? We should be calling for your heads on a plate.

People like this are being allowed to loot the economy with impunity, and they’ve being allowed to get away with it because they’re being protected by the political establishment, which has allowed itself to be bought. It explains why nobody was prosecuted for fraud in the wake of the 2008 banking crisis, and there has been no tightening of the lax regulations that allowed this crisis to happen.

It’s exactly the same as the declining cities in parts of Italy and the United States where The Mafia has its hooks in goverment and bleeds the local economies dry. The only difference is The Mafia kill those who oppose them, and the private equity houses haven’t (yet) crossed that line.

The mantra is we must coddle the rich because they’re “wealth creators”. But this mantra comes from the paid shills of these thieves and from their useful idiots who have read too much Ayn Rand. But, as the Phones4U collapse shows, this is a lie. They don’t create wealth, they merely steal it.  As as for them being “job creators”, don’t make me laugh.

This entry was posted in Uncategorized and tagged , . Bookmark the permalink.

4 Responses to Why are we not rioting on the streets?

  1. Michael says:

    Quite so, Tim, but what can be done about this?

    The obvious thing to do would be for the creditors who took the loss to take action against the fund which paid itself the huge dividend. However, as far as I can see no actual law was broken. The reason why limited companies must include “Limited” or “plc” in their name is to give people fair warning that limited liability is in play and in the event of insolvancy there might not be enough money to pay all the debts.

    In this case the folk who lent Phones4U all that money when promptly got paid out as dividends should have known they were taking a risk and they have to eat the loss.

    The folk who asset-stripped Phones4U may well be morally liable, but I do not see that any sanction can be sought in our courts. However, they should be named and find themselves blacklisted should they seek any future loans, personally or as directors of any company.

  2. Tim Hall says:

    “They have’t broken any law”

    That, indeed, is the problem.

    They’re allowed to get away with this sort of thing because regulations are too lax. And regulations are too lax because our politicians have been bought.

  3. John P. says:

    According to the founder of Phones4U, the company was servicing the debt perfectly well and could have continued to do so. What did for the company was that their suppliers decided they didn’t need them any more, leaving them with nothing to sell. Each supplier decided that they would rather deal direct rather than pay a middleman and one by one they left. So the business would have gone under whether they had been saddled with the debt or not.

    You can’t say that all rich people are thieves. In this case, Phones4U was built from from scratch so John Caudwell is definitely a job creator and in giving people jobs he is therefore a wealth creator. Having sold the business, he is now rich. In fact, he appears to be a serial entrepreneur in this respect and is apparently now something of a philantropist. He is not alone in doing that.

    Yes, I agree that there are rich people (or businesses) out there that are unethical and ruthless but you can’t tar everyone with the same brush. The problem is creating an environment that works. You want something where people are able to build a successful business but not allow the situation to be exploited in an unwanted manner. If the regulations are too lax then you get people pulling all sorts of nasty tricks. But if it is too draconian then people think “stuff it, I can’t be bothered with this” and either don’t start or go somewhere else. Both extremes are undesirable from an economic point of view and the problem is finding the right balance between them.

  4. Tim Hall says:

    Just to make it clear, I’m not saying all rich people are thieves. Some of them earned their wealth honestly through building businesses than provided goods and services. Though the people working for them who provide the actual goods and services deserve some of the wealth-creating credit too.

    But too many of the current super-rich don’t make their money that way.

    As for Phones 4U, it’s difficult to see how they wouldn’t have been able to compete far more effectively in the marketplace if they hadn’t been weighed down with massive debts.