May is just let­ting Cor­byn call all the shots

The Sunday Telegraph - Money & Business - - Business - LIAM HAL­LI­GAN Fol­low Liam on Twit­ter @liamhal­li­gan

‘Afree-mar­ket econ­omy, op­er­at­ing un­der the right rules and reg­u­la­tions, is the great­est agent of col­lec­tive hu­man progress ever cre­ated,” de­clared Theresa May last Thurs­day. “It is un­ques­tion­ably the best, and in­deed the only sus­tain­able, means of in­creas­ing the liv­ing stan­dards of ev­ery­one in a coun­try.”

Eco­nomic Agenda unashamedly backs free mar­kets. So I was de­lighted to hear that the Prime Min­is­ter was to give a speech at the Bank of Eng­land to “cham­pion cap­i­tal­ism”.

Such an in­ter­ven­tion could hardly be more timely. Jeremy Cor­byn, at last week’s Labour con­fer­ence, pre­sented an eco­nomic man­i­festo both de­ranged and dan­ger­ous. His spend­ing pledges, rent con­trols and other heavy-handed state in­ter­ven­tions would be dis­as­trous for liv­ing stan­dards.

At the same time, many hard­work­ing peo­ple now feel – rightly – the sys­tem isn’t work­ing for them. Wage growth is sub­dued, liv­ing costs are spi­ralling and in­creas­ing num­bers of fam­i­lies feel the cold wind of fi­nan­cial in­se­cu­rity. Even mid­dle-class pro­fes­sion­als, hav­ing once as­sumed a steady job would lead to home own­er­ship and a good life­style, are be­ing forced to re­con­sider.

That’s em­pow­ered Cor­byn to say “cap­i­tal­ism faces a cri­sis”. His statist so­lu­tions may be bonkers but mil­lions are lis­ten­ing to “Jezzer” as they feel the econ­omy is rigged against them.

Of course free mar­kets are the “great­est agent of col­lec­tive hu­man progress ever cre­ated”, as May said on Thurs­day. Since the 1989 fall of the Berlin Wall, cap­i­tal­ism has lifted lit­er­ally bil­lions of peo­ple out of poverty. Over the past 30 years, the share of the global pop­u­la­tion in “ex­treme poverty” has plunged from 40pc to less than 10pc. This un­al­loyed tri­umph has been driven by the spread of prop­erty rights, con­tract law and pri­vate en­ter­prise – in other words, by cap­i­tal­ism.

Closer to home, though, May her­self has long ac­knowl­edged the need to cre­ate a Bri­tain that works for the “just about man­ag­ing” as well as the bet­ter off. In the quo­ta­tion at the start of this col­umn, she ac­knowl­edged the need to “in­crease the liv­ing stan­dards of ev­ery­one”.

Given that, and the full-frontal at­tack from Cor­byn, this Bank of Eng­land mis­sive was worse than dis­ap­point­ing. Show­ing a woe­ful lack of imag­i­na­tion and courage at a cru­cial mo­ment, May’s speech also failed ut­terly to grasp the prob­lems of mod­ern Western cap­i­tal­ism.

May should have con­fronted, head-on, Cor­byn’s neo-marx­ist twad­dle that cap­i­tal­ism inevitably leads to higher in­equal­ity. This is non­sense, as long as mar­kets are work­ing prop­erly. The trou­ble is that cap­i­tal­ism, in the UK and else­where, isn’t func­tion­ing well be­cause of crony­ism, over-reg­u­la­tion and the long ten­ta­cles of vested in­ter­ests. And that’s fu­elling deep dis­con­tent.

Too-big-to-fail banks that ex­tort govern­ment bailouts are anath­ema to cap­i­tal­ism. Mo­nop­o­lis­tic cor­po­ra­tions that re­strict com­pe­ti­tion and ex­ploit con­sumers are anath­ema to cap­i­tal­ism. Pow­er­ful util­i­ties that rip peo­ple off, and go largely un­pun­ished, are anath­ema to cap­i­tal­ism. Plum­met­ing so­cial mo­bil­ity is anath­ema to cap­i­tal­ism – be­cause it se­ri­ously un­der­mines the so­cial con­tract upon which cap­i­tal­ism is built. And political, busi­ness and me­dia elites that are far too en­twined, with the same peo­ple mov­ing eas­ily be­tween them, are anath­ema to cap­i­tal­ism.

These trends are in­creas­ingly ap­par­ent in mod­ern Bri­tain, to any­one with an open mind. That’s why the UK’S broad cul­tural and political ac­cep­tance of free mar­kets is now be­ing ques­tioned, and ur­ban trendy types are in­creas­ingly quot­ing Marx.

“We have al­ready over­hauled our sys­tem of bank­ing reg­u­la­tion,” said May at the Bank of Eng­land, “put­ting in place strict new rules on bank ring-fenc­ing”. Yes, al­most a decade on from the Lehman col­lapse, spark­ing the crash that also ex­posed the ran­cid state of the UK bank­ing sec­tor, struc­tural bank­ing re­forms are fi­nally be­ing im­ple­mented. Yet the safe­guards have been so di­luted by cor­po­rate lob­by­ing as to be largely in­ef­fec­tive.

“We know our sys­tem of tech­ni­cal ed­u­ca­tion leaves too many of our young peo­ple with­out the skills they need to get a job,” stated May, in her bid to counter Cor­byn. So why has the in­tro­duc­tion of new “T-level” qual­i­fi­ca­tions, first an­nounced in 2015, just been de­layed again. This muchtrum­peted “revolution” in vo­ca­tional train­ing, vi­tal to the hopes of count­less young­sters, is now shelved un­til 2020.

And why – why?! – did May give an en­tire speech de­fend­ing cap­i­tal­ism with­out even men­tion­ing the sin­gle big­gest griev­ance of the army to 25 to 40-year-olds who voted for Cor­byn in June, tak­ing him to the brink of power? Namely, our chronic hous­ing short­age. For, above all, a house­build­ing sec­tor, de­lib­er­ately re­strict­ing the sup­ply of new homes to keep prices and prof­its high, pre­sent­ing count­less young­sters with the locked door of un­af­ford­abil­ity, is anath­ema to cap­i­tal­ism.

“Why sup­port cap­i­tal­ism if you have no cap­i­tal.” It has al­most be­come a cliché. But one ap­par­ently yet to pen­e­trate the Down­ing Street bub­ble.

Cap­i­tal­ism, if it is to work well, and sur­vive, re­quires a bal­ance be­tween en­ter­prise and em­pa­thy, be­tween de­ter­mi­na­tion and de­cency, be­tween soar­ing cor­po­rate am­bi­tion and re­straint. Gov­ern­ments, if they’re to sur­vive, need to demon­strate they’re on the side of or­di­nary peo­ple.

May should have used her speech to de­clare she will re­new cap­i­tal­ism, fac­ing down cor­po­rate be­hav­iour that risks sys­temic in­sta­bil­ity or dis­plays ex­ces­sive greed. Be­ing pro-mar­ket, af­ter all, does not al­ways mean be­ing pro-big busi­ness. May needs to un­der­stand, as does ev­ery­one who wants to de­fend cap­i­tal­ism, that it of­ten means pre­cisely the op­po­site.

‘May should have used her speech to de­clare she will re­new cap­i­tal­ism’

Theresa May’s talk of help­ing those ‘just about man­ag­ing’ has failed to con­vince many

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