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Capitalism for the people

    I had the privilege of attending the Margaret Thatcher Conference on Liberty (#Liberty2014) organised by the Centre for Policy Studies (CPS) this week. It was an international conference held in London's historical Guildhall to celebrate the 40th anniversary of the foundation of the CPS by Sir Keith Joseph and Lady Thatcher. 

    It featured a series of world class speakers; from professors such as Niall Ferguson, Luigi Zingales, Deirdre McCloskey, Richard Epstein, Deepak Lal, Art Laffer, to former and current politicians such as Australia's ex-PM John Howard, Estonian PM Taavi Roivas, Polish Minister of Foreign Affairs Radoslaw Sikorski, British MEP Daniel Hannan, UK Secretary of State for Education Michael Gove, retired US army General Petraeus, and a number of journalists, businessmen and the like. And of course the CPS chairman Lord Saatchi who presented a new policy aimed at restoring Britain's growth potential - #thePolicy. The conference was opened by British Nobel prize winner in literature – V.S. Naipaul. The full list of speakers is here

    The emphasis was on issues that are mostly overlooked by critics of the so-called "neoliberal doctrine" - a focus on Capitalism for the people, a moral case for capitalist democracies, a way of thinking highly advocated and practiced by Lady Thatcher. Her critics often forget that she strongly opposed the accumulation of power by the elites and the consequential rise of cronyism. She advocated wealth creation and the principle of property ownership. But as much as she supported wealth creation, she was against wealth expropriation. She knew of the distinction of being pro-business and being pro-market. One does not imply the other. Being pro-market meant supporting competition and equal opportunity, not creating monopolies or picking industry winners. This is what the governments that succeeded hers have forgotten. The banking and media elites whose power was only partially exposed by some of the recent scandals (the Leveson inquiry, LIBOR) would never have been able to accumulate so much political clout if Britain truly continued down the path set by Lady Thatcher. The extent of their cartelisation was shown clearly in Lord Saatchi's presentation: 

    Source: Saatchi (2014) "The Road from Serfdom", pg.8

    Saatchi pointed to a survey which showed that 70% of Britons don’t trust neither big government nor big business. The direction of policy proposals is quite obvious in this case. 

    The conference thus presented a realistic view of capitalism. The speakers quickly and precisely recognised its problems: cartelisation, cronyism, corporatism, clientelism. These are essentially the reasons behind rising inequality and low social mobility. Lack of opportunity leads to negative selection. As powerful interest groups capture and redistribute most of the public spending towards themselves, less and less is left for the poor ends of society particularly in terms of schooling and health. Inequality is a product of a faulty, captured, crony capitalism, not its liberal alternative. This is why proposed methods to deal with inequality - such as policies aimed at imposing higher tax burdens - are short-sighted solutions, in most cases counterproductive.

    To deal with the problems of Western capitalism, we must encourage more competition in order to dissolve the highly accumulated political power of big business, and offer more incentive-based policies aimed at helping the poor. Capitalism was designed to work for the people - it was aimed to alleviate poverty. Being pro-market or pro-capitalist does not imply being anti-equality. On the contrary, the point of the capitalist system is to offer everyone the same opportunity for success. Liberalism achieved within capitalist democracies necessitates freedom of opportunity. Other systems (socialism, national-socialism, feudalism, etc.) fail to offer such incentives. They also lack one important process that makes capitalism successful: trial and error.

    One should always think of capitalist democracy as a trial and error process. When cronyism prevails we are obviously in state of error. But via scrutiny, innovation, and a persistent exchange and competition of ideas we are able to fix the faults of the system. This is what Thatcher and Reagan did after the stagflation of the 1970s. The answer is always more competition and more innovation. The same way they have cleared the path for the beginning of the third industrial revolution (I.T.), we need ideas and leaders that will remove obstacles from the still-ongoing technological revolution. The Liberty Conference was the first step in the right direction. 

    Vuk Vukovic is a lecturer at the Department of Economics, Zagreb School of Economics and Management (ZSEM).

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    Comments

    Russell Verbeek - About 1733 days ago

    For a long time all major political parties have been operating under the assumption that helping a transnational corporation get even more, dilute 'restrictive' laws and rarely be critiqued was very helpful for the UK economy.

    This article seems to indicate some influential thinkers who are both at the top and to the right disagree with this long held view.

    If this were truly the case, it could lead me to vote for a party I could never before bring myself to vote for!

    However I think self interest is the true driver of cronyism etc and I see no possibility for a reduction in it. Outside of a shock trauma, of some kind (banking crisis x10) , to mainstream society.

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