by Stoker
No doubt it must bring much amusement to our readers to find Only Connect’s writers – kept, as PG Wodehouse noted of his time as a writer in Hollywood, in small hutches and periodically allowed out for exercise on short leashes – at each other’s throats. In June, your correspondent mused distractedly on modern threats to capitalism in Down with Capitalism! Really? This provoked an instant and searing response in the July edition from my distinguished and forceful colleague, Michael Carberry, in Up with Capitalism! Up with Regulation of Capitalism!
The Editor, always liking to see the team getting some intellectual exercise, and poo-poohing the dangers of fisticuffs at the Christmas lunch, has now rung the bell for another round. It is worth pointing out, as the protagonists struggle back through the ropes into the inky ring, that both were arguing somewhat the opposite of what the titles of their articles might suggest*. Stoker was not calling for the downfall of capitalism, and he suggests that Mr Carberry was, far from promoting capitalism, seeking to encase it in a centralised, state-controlled Gordian knot of regulation which would negate all the benefits that ought to flow from mankind’s most beneficial economic system.
Capitalism is perhaps not quite the right word though. ‘Capitalism’ is readily applicable to any economic system that uses accumulations of financial capital. It was perhaps that blasted old nuisance Karl Marx that gave the word a bad odour. China is capitalistic; the People’s Republic has built itself up as a major producer of the world’s goods on capitalist lines, though without the freedom and encouragement given to entrepreneurs, as for example, in the USA (and Taiwan). In China the State is effectively the main owner of capital, allowing private individuals a role in creating wealth, but not much long-term certainty of retaining it. Russia under Mr Putin also has become a capitalist society. Here also there is a role for the hard-working and resourceful businessperson, but perhaps even less certainty of keeping the gains. The art in both countries is knowing when – and how - to get out with as much gold as possible, or at least remaining in the magic circle of those friends of the rulers who are allowed to go on owning, directing, and indeed spending. (This may be a conundrum that Mr Putin himself is contemplating: if one falls from favour, how does one extricate oneself, complete with dosh?)
So, having clarified our terms, we must turn to Michael’s thoughtful critique. Alas, he seems to have taken a leaf out of the Putin/Stalin/Xi Book of Showtrials by accusing your correspondent of saying “fings wot he didn’t”.
Of course there is a role for government in a free society: to maintain a system of law which protects weaker citizens and gives certainty (and proportionate remedies); to protect liberty as much as possible; to balance competing claims and remove abuses and monopolies. My article posited that this has, alas, gone too far; that light-touch ‘regulation’ has become increasingly heavy footed ‘control’, that what we have is direction from the back seat which is often (not, I agree, always) inimical to the best interests of our societies.
Let’s be clear: what I am arguing for is more and better ‘free enterprise’. Not an unsupervised jungle where the strongest crush all rivals; that would be no sort of freedom at all. Many entrepreneurs, as we will style actual practitioners of free enterprise – but businesspersons will do just as well - do not perhaps think of themselves as capitalists. If we say to them ‘capitalist’, they may think of bankers (with or without top hats and stripey trousers), or mysterious, offshore yacht owners juggling mobile phones as they buy and sell the high street, or even oligarchs with odd accents lurking behind electronic gates in Surrey. But in truth anybody who owns a significant element of the means by which they earn their living is a capitalist in that they practise free enterprise. Up with them indeed! They are the creators of wealth, the safe-guarders of liberty, the providers of our employment and prosperity, the drivers of progress as they invent or improve new or better ways of making more efficient or cheaper mousetraps.
Just take the UK; the government could not run the proverbial wotsit in a brewery. They have in the past proved they cannot run a steel-making industry or a coal- mining business. They are currently proving they cannot run a healthcare business or, even from the sidelines, an energy business. They are about to prove, for the second time, that they cannot run a railway network. And for good measure, they are wrecking the housing rental business. And this mostly under Conservative governments containing significant numbers of relatively skilled businessmen.
Private enterprise revolves around giving consumers – people – what they want. And it works at its best when there is a fair degree of competition; when there is a free market enabling the consumers to choose. They can pay more for better quality or pay less for lower quality. Do not denigrate the latter option; there is a great benefit for the poor in having a less good product than none at all. Choice is at the core of a market-based system; it enables each purchaser to weigh up what matters to them and they to buy what gets as close to that ideal as they can. And of course it keeps efficiencies up and prices down, and enables profits to be made to develop new products and ideas.
Which is not to say (and the original article did not say) that there is no role for regulation by government. Monopolies arise, both naturally and because a particular enterprise is so efficient that it more or less destroys the competition. Then the government should rightly intervene in whatever is the most appropriate way to ‘hold the ring’, to force competition or create a quasi-competitive arena. This sometimes works – closely managed denationalisation of electricity retail supply worked very well in the UK - but usually doesn’t. Cack-handed attempts to make British Telecom behave as though it was competing in a market place have failed dismally. The privatisation of the railways in the UK was half successful but leaving ownership and control of the track in, effectively, government hands was a disastrous flaw. Incidentally, Michael, Brunel’s broad gauge was simplistically appealing but also very inefficient, both in terms of land use and operationally – that is why no other companies or indeed countries took it up (imagine the cost of Alpine viaducts and tunnels if those railways had been broad gauge – and for what benefit?). Monopolies will often abuse weaker parties in the system, and one purpose of government is to be the counterweight to such abuse, the protector of the weak.
Of course, as Michael implies quite correctly, there has to be a legal framework to free enterprise. There are those that would no doubt like unregulated sale of hard drugs, but society ordains not. One of the things that government should do is regulate, as simply and clearly as possible, matters relating to safety and create clear lines of responsibility. None of this was relevant though to Prime Minister Margaret Thatcher’s privatisation of the coal industry – long, long overdue. Nor did Mrs T have anything to do with the falling world price of coal which made UK coal mining increasingly uneconomic.
The Thatcher government’s reforms to the rental housing market were spectacularly successful, creating a new world in which it became readily possible for the young and footloose to rent properties in the place, size, and style which they wanted. Rents were affordable, the supply expanded (but not, because of the UK land-use planning system, enough). It was not perfect; there were scandals and abuses, and some rentals were of better quality than others. But it more or less solved a problem. Note the “more or less”. Since then the politicians and legislators have been swinging their big hammers to crack small nuts. Another round of bashing is about to take place. Landlords in the UK are withdrawing from the market, new supply has dried up, and rents are rising. Landlords’ returns, never huge, are falling; so the quality of accommodation is going down and repairs are delayed or bodged. Does government never learn?
Government departments are not stupid, far from: at senior levels they contain many highly intelligent and competent people. But my goodness they like to interfere and they do not like to simplify, the curse of cleverness indeed. By so doing the danger is that we are moving rapidly to, and will end with, the worst of all possible worlds – vast, inefficient enterprises, high costs to consumers, an oligarchy of businessmen too close to the those who regulate them, and a failure to supply what the citizenry want at the price they can afford.
As we said last time, free enterprise is not perfect. Nothing is. But with light-touch regulation it is the best way forward we have yet discovered.
*My fault; I chose ‘em. Sorry.
The Editor