Behind the term "private equity" hides good old "asset stripping" or "corporate raiders with junk bonds". It is not about making profits from making things and selling them. It's about making money from money, buying up companies, stripping them and putting them back on the market with a mountain of debt. Or to use a simpler term, it's capitalism.

The financial pages of the papers have been abuzz about "private equity". A bunch of private equity firms have just launched a bid of up to £10 billion for ownership of Sainsbury's. All they have to do is to buy up enough shares on the Stock Exchange to get a controlling stake and, Bob's your uncle, they're the new owners. Now you've heard of Sainsbury's. They own 750 stores across the land and employ tens of thousands of workers. The stalkers are CVC, Blackstone and Kohlberg Kravis Roberts. You haven't heard of them. What's their game?

First up, where will they find £10 billion, or whatever it costs? That's the point. A lot of these private equity firms don't have the money and they don't buy the shares with money. They swap them for pieces of paper that used to be called junk bonds. This means the only way they'll be able to pay money on the bonds is by looting and pillaging the firm they've just taken over.

The first thing they do is make the firm private. By becoming a private company as against a plc, they can't be taken over. And they're not subject to the same scrutiny as a firm whose shares are quoted on the Stock Exchange.

How can they do better than the existing owners? They talk about "efficiency gains". Most of us would think of an efficiency gain for a firm like Sainsbury's would be to stop moving the tins of beans around in that irritating manner and leave them in the same place so we can find them. But that's not what they mean.

Will Hutton has suggested a way private equity firms can make more money from Sainsbury's. All supermarket chains own expensive town centre property. Let Hutton explain. "If the new owners could sell its stores for £7.5 bn and then require Sainsbury's to rent them back, they would own the balance of Sainsbury's for £2.5 bn. If they could squeeze wages and suppliers, they could boost its profit and then float the company on the public markets for £5 bn." Money conjured out of thin air!  

And they do screw the workers. Private equity took over the Automobile Association and now there are 20% less patrolmen. But that's why people join the AA - because of the patrolmen, not to line a bunch of rich financier's pockets

Here's the crazy bit: Gordon Brown will subsidise the borrowing of these obscenely rich people with tax relief on this "business investment" with our money. Thanks a lot, Gordon.

So it's not money conjured out of thin air. It's asset stripping. It's all done by "sweating" the firm's assets. Private equity firms reckon to make a 20% return in 3-7 years. And then? And then they float them back on the Stock Exchange as a public company in a state like the undead. This is what they did to Debenhams, back on the Stock Exchange, laden with debt.

Private equity financiers would argue that the threat of takeover keeps firms on their toes and makes capitalist competition work. This is like the jackals that prey on migratory wildebeests arguing that they only do so to keep the veldt tidy!

They're after Little Chef. Now, even for those of us without an entrepreneurial instinct in our heads, it is obvious that Little Chef is an idea whose time has gone. One way or another Little Chef will fall under capital accumulation's chariot wheels, and blameless workers will lose their jobs.

Tony Woodley, General Secretary of the Transport and General Workers is rightly worried about private equity's bid for Sainsbury's. There are 20,000 T&G union members working for the company. And Woodley is right to query whether we should be subsidising the private equity vampires through tax breaks. Sainsbury's is not a failing firm like Little Chef. And yet it's under threat, and therefore so are the wages and jobs of the workers.

Will Hutton (Observer, 11th February) began his article by commenting, "For most people it's just more impenetrable financial shenanigans and another takeover in which extremely rich men get even richer. This is just capitalism, isn't it?" Right first time! The point is, under capitalism no worker's job is secure.

Hutton goes on to say, "Wrong... It's about how democracy works in a capitalist society." But democracy doesn't work in a capitalist society. Will Hutton is suggesting public companies quoted on the Stock Exchange (plcs or public limited companies) are more accountable than private companies. Most shareholders are motivated by greed and have no commitment to the firms of which they are part owners. That's why Sainsbury share prices went up when they heard of the bid, and why the shareholders responded by selling out to the bidders to make a quick buck. So Hutton is wrong to suggest that there is more commitment by the "stakeholders" to the firm and more information for the public with a plc.

Most of the biggest scams of recent years - Enron, Polly Peck and Worldcom - happened in plcs. It is a basic axiom of capitalist management that they try to enrich themselves by all means, including illegal means, and then lie about it to the workforce and the wider public (including "outsider" shareholders). This is how capitalism works. Private equity finance just gives them more scope to get on with it, that's all.

This has happened before. They've just changed the names. In the 1980s they were called corporate raiders with junk bonds, now it's private equity finance. It all involves piling up debt. They call this "leverage" or being "high geared". Try telling your bank manager you're a high geared buccaneering venture capitalist when you're up to your ears in debt and see how he takes it.

It's really like betting an accumulator on trap six at Romford Dogs. If the dogs all win, your winnings multiply from a small stake. But that doesn't always happen. It's all gone pear-shaped before. Venture capitalism, whether it calls itself private equity finance or not, creates a feeding frenzy. You get a classic financial bubble. Share prices go up because people are buying and people are buying because share prices are going up. Isn't capitalism logical?

Bubbles burst. After the dotcom bubble burst, these people were forced to lie low for a while. Now they're back with a vengeance. It'll all end in tears. Let's make sure it's their tears, not ours. Will Hutton' article is called "Welcome to the dark age of capitalism." The Dark Age is the only age capitalism knows.