G8 news

Profits and lies

You may think that an oil company without oil is like a pub without beer, but capitalism is not a rational system. Quite the opposite. The profit system is irrational by its very nature and ridden by conflicts, contradictions and extremes.

Shell 2004 is a perfect illustration of how capitalism works. The company faced a crisis of confidence after fiddling the figures and overstating its reserves, but that did not stop Shell making a record net profit of $18.5 billion dollars, a 48% increase from the year before. The most profit ever recorded by a UK-listed company!

Shell promised to pay dividends of at least $10 billion in 2005, up from $7.2 billion in 2004, to its shareholders and buy back shares worth $3-$5 billion (buying back shares is another form of dividends).

“The move to buy back shares and the dividend increase are positive. The writing down of reserves is disappointing but hopefully they’ve drawn a line under the affair”, commented Cavendish Asset Management fund manager Paul Mumford, whose portfolio includes Shell shares, after it became known that Shell had pumped up a record profit. (Reuters 3 Feb 2005)

This comment sums up what capitalism is all about - profit and dividend to shareholders comes first. And $10 billion is a huge sum to be shared out by a handful of big shareholders. It exceeds the total GDP of Zambia in 2004, ($9.4 billion) which has to be shared out amongst a population of 11.2 million. Zambia is one of the world’s poorest countries - four out of five live below the poverty line.