The public have spoken. Faith in capitalism has collapsed. What they want is a Stalinist super-state that owns all private property, represses all private business and controls every aspect of their existence. The only hope for free enterprise is a plucky band of conservative ministers.
At least that’s what you would think after Prime Minister Theresa May’s conference speech in which she “defended capitalism” from the an onslaught of mad Bolsheviks concerned about how much rail fares have risen over the last 25 years.
The reason why capitalism, the great creator of wealth and prosperity for everyone, is under threat is a recent study from the Legatum Institute, claiming that 83% of the public want nationalised water companies, 77% want to re-nationalise electricity and gas companies and 76% want to re-nationalise the railways.
Not to mention the Labour leader, Jeremy Corbyn, stating in his party conference speech say to that capitalism faced “a crisis of legitimacy”. All this prompted May to remark that capitalism “is unquestionably the best, and indeed the only, sustainable means of increasing the living standards of everyone in a country.” The fact that a Tory Prime Minister feels the need to make this point is remarkable.
I am going to take this opportunity to disagree with the Prime Minister (shocking I know) and say that I don't think that people are ready for Full Communism just yet. What this study show is that the public is against cartels and natural monopolies. Dig a bit deeper and you’ll find that they don’t like the excesses of City bankers or exploitative practices of companies like Sports Direct. They also don’t like the huge profits and huge price rises of private energy companies as well as the expensive and bad service delivered by private train operators.
What this report shows is that people are against “neo-liberalism” or as I prefer to say, “anything goes capitalism". The idea that it’s okay as long as it’s for business. Getting your t-shirts made in Vietnam by a child paid 3 cents a day and forced to work at gunpoint - that’s just business. Undercut small independent firms until they close and then jack up the price - that’s just business. Punch someone in the face, that’s wrong, but drop toxic waste in a lake and poison a town - that’s just business.
What people want is healthy capitalism. Capitalism as advertised, with competitive markets and innovative firms. Not natural monopolies that make huge amounts of money while the service gets steadily worse. If the public can’t have the capitalism that they were promised, the public wants that capitalism that they had before Margaret Thatcher took off all the restraints. If it takes state intervention in the markets to make capitalism healthy then the public is willing to accept this.
As well as being what the public wants, healthy capitalism is good for our economy. BHS was a perfectly viable business not long ago. Other European Countries have much better rail services and lower utility prices. The broader problem is that anything goes capitalism is not delivering on the promises of its proponents. Instead what has happened is that the value produced by our economy has been captured the owners of the large firms, natural monopolies and cartels. At the same real time wages have declined, jobs have become more insecure and many people can’t afford to a place to live.
The problem with anything goes capitalism is that it has made the British economy less inclusive. Free markets are not necessarily inclusive ones as Daron Acemoglu and James Robinson point out in their book Why Nations Fail. Their work explains how the inclusivity of a country’s economy determines its economic development. They state that the process to make the British economy and politics more inclusive from the 15th to 20th centuries is what has led to our great wealth.
The pursuit of anything goes capitalism has brought the British economy out the other side of Acemoglu and Robinson’s theory. We have given too much freedom to private firms, which has created vast inequalities and made our economy less inclusive. Tony Judt, in his book Ill Fares The Land, points out that during the years of the post-war consensus the economy grew faster and was more stable than it has been since the government began privatise, deregulate and shrink the state. Not for nothing was this period called “the golden age of capitalism”. The reason for this change in the stability economy is that prior to the reforms of the Thatcher government, our economy was more inclusive.
Today our economy is stagnating, wages are low, costs of living are high and workers have been seen real income fall by 10% between 2007 and 2015, making Britain the lowest advanced economy for wage growth. The inclusivity that built the great wealth of the British economy is being eroded by too much market freedom. We need a state hand on the rudder to steer our economy out of the economic problems created by anything goes capitalism.
These policies of reducing excessive corporate greed, reigning in cartels and taking natural monopolies into public ownership are roughly where the most voters are. These policies will be better for our economy than policies that create greater inequality and make our markets less inclusive.
This is, broadly, what Labour are offering. Nothing like this is being offered by the Tories or the Lib Dems. The question is, do the voters see it this way? The public is probably more Miliband than Corbyn, but it’s Corbyn that’s offering reform to them.
There is a danger that voters assume that Corbyn is offering something more radical because of the politician he is seen as. May, in her speech, was trying to exploit this weakness, by implying that Corbyn wanted to Britain more like Soviet Russia in the 1920s, where as he wants to make it more like it was in the 1950s - only less racist.
Labour has a chance to move to a position most of the electorate support by promoting healthy capitalism instead of naked greed and exploitation. This can be done by embracing the public’s dislike for cartels and corporate excesses. The policies of healthy capitalism offer a chance to fix some of problems with our economy by making it more inclusive.
This is not the end of capitalism, it is just capitalism changing, and to suggest that a criticism of cartels and corporate excess is an attempt to impose Communism on Britain is not only disingenuous, but it fundamentally misreads what voters want.