Bloomberg News

Protests Show Capitalism Losing ‘License to Operate,’ Blood Says

October 19, 2011

Oct. 20 (Bloomberg) -- The protesters camping in London in support of the Occupy Wall Street demonstrators may be right and capitalism risks losing its “license to operate,” Generation Investment Management LLP’s David Blood said.

Blood, who worked at Goldman Sachs Group Inc. for 18 years before starting fund manager Generation with former U.S. Vice President Al Gore in 2004, said the protesters’ message is that the financial system is “broken” and “unfair.”

“In many respects, their concerns are right, and their assessment of where we’ve got to is right,” Blood, 52, said yesterday at a debate at St. Paul’s Cathedral, London, near where the protesters have gathered. “The problem is that capitalism itself is broken or nearly broken.”

The financial industry is too focused on short-term gains and flawed incentives that are eroding trust in the system, Blood said. Generation seeks to maximize long-term returns by investing in companies that prioritize social and environmental factors as well as economic performance. The firm manages about $6.5 billion, according to two people with knowledge of the company, who declined to be identified because the information isn’t made public.

“Unfortunately capitalism has a terrible, terrible name now,” he said. “It’s possible that we will lose the license to operate and then we will have a real problem.”

Outside the cathedral, protesters gathered for a fourth day among tents and banners with slogans such as “capitalism is crisis.” While shop owner Anna Boyle voiced concern about environmental degradation, graphic designer Tina Borkowski criticized bailouts of lenders as well as the Bank of England’s asset purchase program, known as quantitative easing.

‘Trickle Down’

“The bailout money and quantitative easing cash injections were supposed to trickle down, but didn’t,” said Borkowski, 37.

The protesters are drawing both support and criticism from political and business figures. U.S. President Barack Obama said in an interview with ABC News that the public’s frustration is evident in the Occupy Wall Street protests. Republican presidential candidate Herman Cain has said protestors should blame themselves, not Wall Street, if they don’t have jobs and aren’t rich.

“It’s sort of a glib way to push them off as if to say they’re not really very important,” Blood said. “Many of them aren’t saying that business and capitalism are inherently evil. They’re just simply saying that the way it is currently functioning is not working, it’s not right.”

--Editors: Edward Evans, Frank Connelly.

To contact the reporter on this story: Simon Clark in London at sclark4@bloomberg.net

To contact the editor responsible for this story: Melissa Pozsgay in Paris at mpozsgay@bloomberg.net


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