We should give thanks for capitalism
Free market capitalism – don’t we all hate it? From the economy with barely a pulse, to the pricegouging utilities, to the gross inequality across the generations: who dares raise a voice in its defence?
Not even its traditional defender, the Conservative Party, it seems. This week has seen less a rallying conference of the faithful than an existential breakdown: riven by feud, crucified by Brexit and a leadership whose response to hard-left Corbynism is Corbynism Light. More spending, but not so much; better utilities – with more price controls; help with student debt, but just a little; more housing but no more than planning and controls will allow.
It is hard not be struck by the daily miserablism and despond that now seems to permeate what might otherwise be regarded as a modern developed economy. The confidence it needs to succeed has given way to a constant complaint, protest and defeatism that permeates almost every news bulletin.
And at the heart is a morose surrender to doubt and discontent about the fundamentals of the market system. It is not just that Corbyn’s hard-left programme now rules the roost within the Labour Party. It is leading the Conservatives in the polls.
Who dares to offer a positive defence? This is, after all, a system whose demise has long been predicted, that has left us unfulfilled and in constant need to have more and better. Is it not riven with contradiction? Does it not contain the seeds of its own destruction?
Of course it does. That is precisely why it has survived as long as it has. For its defining characteristic is not a granite, monolithic edifice resistant to reform but its unfailing ability to adapt and change. That is exactly why today we should be far more positive about it.
It has, say critics, failed to deliver on our everyday aspirations or improve our lot. But you need only look at the astonishing changes in our everyday life in recent years – unemployment at a multi-year low; numbers in work at a near record high; 75,000 new jobs created last year through record inward investment to the UK; record numbers in higher education; record spending on health; asset prices and the stock market brushing all-time highs; record car purchases, record tourism and record consumer spending.
Or consider the dramatic changes in everyday life wrought by private endeavour in technology and electronics: the ubiquitous do-everything iphone we would be bereft without; the internet in every home; over £1 in every £5 of all non-food spending now being done online. How neurotic many now become if our Amazon orders are not delivered within 48 hours!
Every new improvement and advance leaves us hungry for more, every satisfaction met feeds our aspiration for betterment: but that is exactly how in a market system with choice in the hands of millions of consumers, improvement and advancement are constantly driven forward. This is a continuous upheaval – system would be too inflexible a word – that meets myriad constantly changing and evolving needs. At the same time, it generates hundreds of billions of pounds in tax revenue to sustain our ever-rising ambitions in social security and welfare spending. Government spending now accounts for around 40 per cent of gross domestic product. Total spending by the government is now running in excess of £800 billion, financed by taxes that now rake in £690bn.
You could be forgiven for thinking that we are bent double under the yoke of austerity, that we live in an age of unparalleled poverty, a cruel, dismal world of benefit cuts and food banks. But the budget allocation for social security spending in Britain today is running at more than £220bn, or twice what it was in the 1970s.
This is not heartless, uncaring, free market unbridled capitalism. It is a mixed economy with the state as a major participant, one in which hundreds of thousands of businesses and small firms generate tax revenues on an unprecedented scale. Add this to the taxes on incomes earned by millions in employment and the tax yield on personal savings and investments and we are bound together in a partnership, governed by the rule of law, whose terms and conditions can be – and frequently are – changed by voter preference through the ballot box. There are periods when we want to encourage more enterprise and economic growth through lower taxes, and others when we wish higher spending by the government – and higher taxes on those better off. The pendulum constantly swings.
Much is made of “market failure”, of failings in corporate governance, of excessive boardroom pay and poor if not rapacious treatment of consumers: a state of affairs that falls well short of perfection and which is in need of continual vigilance, challenge and reform. The errors of Provident Financial and the evidence of accounting misdemeanours of Tesco can be brought to light. Companies can also fail. And it is to the good that failure is allowed to unfold, the sanction of the market allowed to operate and the detritus put to better and more successful use.
But such failings, however, are far from confined to private enterprise. Government failure can frequently be seen in misallocated resources, inefficient spending, hugely expensive vanity projects of which the £50bn-plus high speed Londonbirmingham rail link may be regarded as an egregious example. There are examples of pay excess in universities as well as in FTSE 100 boardrooms. And public sector bureaucracies can prove highly resistant to change. They can live on in a bubble of self-protection, and at a draining cost to the public purse.
And then there are areas where public demand for improvement can conflict with public demand for regulation and control. Housing is one such area. There is cross-party pressure today for more houses to be built. It is a common cause.
But this is a sector where the public also seeks a high level of regulation and control. What is often dubbed “system failure” is the product of democratic insistence on environmental standards, protection of green space, energy efficiency, highest standards of building design and materials safety, and social preference. This is no free-range, neo-liberal playground where anyone can do as they like. As in so many areas of modern life in Britain, it is governed by an intricate web of constraints that the political representatives of voters have put in place. To this extent the current attack on “free market capitalism” is to go to war against a straw man.
Let the pendulum swing – but beware of stopping the clock. We should take more care than we do of the many aspects of modern life where private enterprise and endeavour have worked to our betterment and where entrepreneurial innovation and invention have made a colossal contribution to our betterment. Do we really imagine that an omniscient state, bureaucratic determination, ever higher taxes, ever greater debt and bigger, more extensive government would meet our needs more efficiently, improve our economy and make us happier? This I doubt.
To misquote Churchill,
it is the worst form of economic system, except for all the others, writes
Bill Jamieson