The Daily Telegraph

Cap­i­tal­ism, not so­cial­ism, will fix this mess

It’s time to fight back against the lu­di­crous claim that Covid has ex­posed the fail­ures of the free mar­ket

- Kate an­drews Finance · Politics · Business · Theresa May · Boris Johnson · Pope Francis · United Kingdom · Tories

Party con­fer­ences dur­ing Theresa May’s era marked the stages of a prime min­is­ter learning the er­rors of her statist ways. Grad­u­ally, her at­tacks on the “un­fet­tered free mar­ket” be­came pos­i­tive com­ments on the role of mar­kets in driv­ing pros­per­ity. Still, the rhetoric never quite matched the poli­cies: from dither­ing on the hous­ing cri­sis to the icy treat­ment of for­eign tal­ent, May’s tributes to cap­i­tal­ism were a poor guise for her in­ter­ven­tion­ist in­stincts.

The same can­not be said of her suc­ces­sor. Un­like May, Boris John­son has never been afraid to pro­mote his pro-mar­ket, pro-en­tre­pre­neur­ial phi­los­o­phy. By no means is he a purist – he is of­ten led astray by the glam­our of a grand­stand­ing state project (how else could HS2 sur­vive?). But he recog­nises the pri­vate sec­tor’s role in fund­ing them. His Chan­cel­lor, Rishi Su­nak, is touted as one of the fiercest de­fend­ers of the free mar­ket in the Cabi­net.

Still, when watch­ing Su­nak’s speech at the Tories’ dig­i­tal con­fer­ence yes­ter­day, you couldn’t help but feel it was an ode to in­ter­ven­tion­ism. The Chan­cel­lor du­ti­fully paid lip ser­vice to busi­nesses and en­trepreneur­s, pledg­ing to cre­ate a bet­ter en­vi­ron­ment for them. But the real hero of the Covid-19 cri­sis seemed to be the state. It was gov­ern­ment that stood ‘‘be­tween the peo­ple and the dan­ger”, gov­ern­ment that spent the money on sub­si­dies and bailouts, and gov­ern­ment which will do ev­ery­thing to “cre­ate, sup­port and ex­tend op­por­tu­nity”, es­pe­cially through its job schemes. The silver lin­ing of this hor­ren­dous year, in Su­nak’s words, was that “gov­ern­ment ceased to be dis­tant and ab­stract, but be­came real, and felt, and some­thing of which peo­ple could be proud”.

The irony is that this Covid world mir­rors what hap­pens when gov­ern­ments try to con­trol economies: strict rules, lim­ited op­tions, mass clo­sures and re­dun­dan­cies; the largest eco­nomic con­trac­tion since the Great Frost of 1709.

That’s not to say the eco­nomic ac­tions of the Trea­sury over the past six months have been wrong: the con­sen­sus of economists on the Left and Right is that a tem­po­rary spend­ing spree was nec­es­sary to han­dle the ef­fects of the pan­demic. The econ­omy needed to hi­ber­nate, and Su­nak came up with one of the best schemes in Europe to al­low it to do so, with­out any threat of na­tion­al­i­sa­tion. But what lies ahead does not in­spire con­fi­dence that state in­ter­ven­tion cre­ates a more pros­per­ous world.

Still, many pow­er­ful peo­ple would try to frame it as such. In his lat­est en­cycli­cal pub­lished on Sun­day, Pope Fran­cis sug­gested that the “magic the­o­ries” of free mar­kets and cap­i­tal­ism had been un­der­mined through our ex­pe­ri­ences of the pan­demic. The cri­tique comes at an in­ter­est­ing time, as the free flow of goods and ser­vices was largely sus­pended, and even made il­le­gal, at the height of the pan­demic. It wasn’t free-mar­ket lib­er­al­ism but the lack of it that made this world a poorer place.

Of course, crit­ics of cap­i­tal­ism ex­isted long be­fore this virus, and will grasp at any straw to re­ject its long list of suc­cesses. But this makes it even more im­por­tant that prom­i­nent lead­ers with lib­eral in­cli­na­tions recog­nise the mar­ket as our short and long-term so­lu­tion for re­cov­ery, by cre­at­ing con­di­tions in which en­ter­prise can start to flour­ish again.

Even with the Bud­get de­layed, the Chan­cel­lor should not post­pone the sup­ply-side re­forms that have a proven track record of boost­ing growth. Busi­nesses that adapted to the cri­sis by mov­ing on­line shouldn’t be pun­ished with a dig­i­tal ser­vices tax for keep­ing those stay­ing at home sup­plied and en­ter­tained. Em­ploy­ers should not face a fi­nan­cial bur­den for hir­ing new em­ploy­ees, which re­quires re­form or sus­pen­sion of their Na­tional In­sur­ance con­tri­bu­tions. Work­ers should get to keep more of their own in­come, es­pe­cially as they seek to pay back loans or rent hol­i­days that racked up at the height of the pan­demic.

The bat­tle be­tween free mar­kets and so­cial­ism that played out in the elec­tion last year felt like the bat­tle of a gen­er­a­tion. As sig­nif­i­cant as it seemed then, we could never have pre­dicted just how im­por­tant it would be, mere months later, to have lead­ers who be­lieve in the power of mar­kets and en­ter­prise. Bri­tain is lucky to do so. It must start putting these be­liefs into ac­tions.

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