This was in the FT yesterday:
Public support for free markets is based on two broad arguments. The first is that they deliver more efficient outcomes than the alternatives. The second is that over time they create increased prosperity for society at large. Both these assumptions have taken a severe jolt in the past few years.
We now know that the efficient market theory is for the birds, and that market failures can have devastating consequences for wide sectors of the public. We also know that the fruits of economic success have become increasingly unevenly distributed. In the US, all the growth — and more — in recent years has flowed to those at the very top. The upper one per cent of Americans are now taking in nearly a quarter of the nation's income every year, double the proportion 25 years ago. Those in the middle have seen their real incomes fall over the same period, precipitously so in the case of those with only high school qualifications.
Rising income inequality. Very slow economic growth. High unemployment. It's no wonder that even a number of politicians on the right have started to express a degree of sympathy for those who have been demonstrating around the world in recent weeks.
Extraordinarily the author was Richard Lambert, former FT editor and former Director of the CBI.
As he continued:
The fact that the protesters have no clear agenda is irrelevant. They represent concerns that many people can relate to, and they are unlikely to go away.
So it may be that capitalism is approaching some kind of tipping point, away from the winner takes all culture of the past three decades.
I agree, of course. Who couldn't?
I do not agree with all his prescriptions. He said:
If left unchecked, public disquiet will sooner or later bring a political response, maybe in the form of much more aggressive regulations and progressive tax systems. These could be at least as damaging as the free market fundamentalism that they would seek to replace.
Respectfully, that's bizarre. We cannot constrain feral finance without more regulation and we cannot redistribute wealth without progressive tax. Those are facts. But let's let Lambert have another word:
Much better for business itself to recognise that it has a real economic interest in the well-being of the societies in which it operates; that success or failure is not just determined by earnings per share or profits per partner; and that a successful market economy has to be built on a degree of trust and mutual respect. Capitalism has adapted to changing political and social pressures in the past, and now is time for it to do so again.
Now with that, again, I concur. I am not opposed to markets: far from it. They form part of The Courageous State, of course, but they only form a part, and have to be properly regulated. In addition, they have to be committed to the greater aims of the society of which they are a part, as Lambert agrees.
But the really important point is this: Lambert agrees the capitalism we have has failed, and the theory supporting it is ridiculous, arguments with which I totally concur. He somehow thinks though that it can be reformed without new theory and new structures, just on the basis that people will be nice from henceforth. Respectfully, I don't agree. That is why I offer new theory in my book, and more than 70 odd pages on reform. That's what we need. And any sensible person will now agree. The old capitalism is left as a myth for right wing bloggers. For the rest of us it's time to move on.
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It was great to see this article. Though, as you say, it is very much a ‘let us clean up our own act in our own way, before the Government does it for us’.
Of course this won’t happen. Look at the press, the City – these vested interests seem constitutionally unable to clean up their act without Government intervention. It reminds me of the Pharaoh in Moses’ day, however much disaster they bring upon themselves and their society – their hearts remain hardened.
Of course as you point out, better regulation and more progressive taxation are solutions to many of our problems and implemented sensibly Mr Lambert should welcome them. He just has trouble rejecting the old time religion, even as it proves itself wrong.
Given the historically unimaginable powers of surveillance available to the state, the rubber stamping role of magistrates in delivering draconian punishments for the mildest display of dissent, the levels of violence used by the police and their virtual immunity from censure and the mass media villification of opponents, the tipping point is surely still a long way off.
I agree that it’s a real sign of the times that a guy like Lambert is now agreeing the system has failed. But really, how can a man get to be that distinguished if that is the quality of his thinking and his understanding of how the world works?
>>>”Much better for business itself to recognise that it has a real economic interest in the well-being of the societies in which it operates”.
Yes, but the point is that unregulated and untaxed (as he would have them be), any company that tries to rise above the lowest common denominator will inevitably be destroyed by those who have no such qualms. If a public company, quickly by the predators of the City; if a private company perhaps more slowly but eventually without doubt. “Business” can only express a collective will not to race to the bottom by placing itself under the control of regulation & taxation by democratically elected government. This would be so obvious to a German it wouldn’t seem worth mentioning.
It’s the ‘unacceptable face of capitalism’ which people are against.
What ‘ism’ would they put in its place?
Emnoughim was one of the options I considered for the economic theory in the courageous State
Socialism: the common ownership of the means of production. Common ownership of land achievable by the taxation of land value (100%). Common ownership of capital (goods) achievable by workers taking over ownership of the businesses where they supply the essential labour, without which there would be no production. Economically efficient as well because land and capital would then only be owned by those who use them. Nationalisation of credit creation. Central collection of market data which are placed in the public domain where producers can use them to fix bottlenecks and gluts.
Socialism and command economies haven’t worked before, so why should they work now?
Read the Courageous State
No one is talking socialism
Why are you putting forward a myth?
I’m reading The Ragged Trousered Philanthropists. Near the end there is a brilliant speech which details the current economic situation and puts forward a detailed plan to move to socialism, as it was envisaged then. This was basically the policy followed by Russia after the revolution. I can imagine that if the RTP had been published when it was written (first decade of 20th century) it would have won many hearts here. It sounds like an excellent plan. However, after some initial success, the Russian experiment failed and the combination of capitalism and the welfare state adopted by the west proved superior to improve the lot of ordinary people.
That was then, this is now. A better form of socialism needs to be developed, with the same basic ethos but recognising that markets, competition, money under democratic control do not have to mean exploitation.
Will someone please get me the book for Christmas?