by Guy Brandon
[su_frame align="right"][/su_frame]A lot of people are going to win big from today's privatisation of Royal Mail, and a lot are going to lose out. The share offering has been hugely oversubscribed, with a 'wall of money' chasing the limited number of shares available. The result? A big spike in the price when the shares went on sale earlier today on the open market, and many initial investors immediately dumping their stakes to make a quick buck. The next lot of investors who pile in may or may not clean up. Given that every transaction needs a buyer and a seller it's fair to assume that, whether in the short term or the long, Royal Mail's privatisation is going to see plenty of losers as well as winners. (That's without thinking of the taxpayer, who will be sold decidedly short if the value settles well above the 330p sale price.)
Welcome to Capitalism. You can buy and sell pieces of a company - meaning that, in theory, your money is funding what that company does - with no responsibility for how it is run. There is a disconnect, a fundamental lack of relationship, between the owner of that capital and its user. When shares are owned for a period of hours or minutes, or even less, that disconnect becomes even starker. The purpose of such trades is not to invest in a company and what it does: it is to extract money from the company and from the next investor, who buys when the price is at the top. It's to get something for nothing: what the Bible calls reaping where we haven't sown (Luke 19). (If you'd like to know more about investing as a Christian, take a look at Paul Mills' Cambridge Paper on the subject.)
This is how we do things, and capitalism certainly has its advantages. But as we've learned from painful experience, it also has its downsides. Breaking the relationship between owner and user of capital means we lack responsibility for what's going on in those businesses - treating the stock market like a race course or a casino rather than work that we fund and endorse. When making a profit becomes the overriding concern, we lose sight of who is affected by our decisions. The Global Financial Crisis came about because debt was bought and sold without sufficient regard for the liabilities involved - it was thought of solely an asset to be traded for profit.
All fairly serious stuff. If you'd like a lighter introduction to the subject, why not take a look at the first of our new series of films, in which Dave tries to buy a mortgage and finds out that Capitalism isn't all it's cracked up to be...