Louie Brockbank is a researcher at the Legatum Institute.
You do not have to be an ardent Corbynista to observe that free markets do not always produce the most desirable results for society, and that the operation of the capitalist system is riddled with faults and failures. As Nick Faith observed on this site recently, even George Osborne and Sajid Javid admit as much.
The housing market provides perhaps the most vivid illustration of this fact of economic life: the existence of a “housing crisis” is now a matter of political consensus. Year on year, we are building substantially fewer than the 250,000 or so houses needed annually to meet demand. The resultant rent rises and shortages are most acute in populous, expanding regions such as Greater London and the Southeast. The average rental cost of a small flat is now above £1000 a month in all but 2 of London’s 32 boroughs, while suburban family homes can rarely be found for much under half a million. The market is simply not providing enough homes at reasonable prices; even housing associations completed just 21,600 homes in 2013, a sharp contrast with the 100,000 social homes local authorities regularly built each year until the late 1970s.
And the public is noticing. Detailed polling for the Legatum Institute’s Prosperity for All: Restoring Faith in Capitalism project, led by ConservativeHome founder Tim Montgomerie, has revealed some genuinely sobering findings. Fully 64 per cent of Britons believe that under capitalism “the rich get richer and the poor get poorer,” while a massive 74 per cent of us think that most big businesses have variously dodged taxes, damaged the environment or secured special favours from politicians to ensure their success.
These bleak statistics more than validate Montgomerie’s call, in his Legatum report, for an agenda to readjust the market economy towards sustaining genuine mass prosperity, and through that to the regaining of public trust. This should be a particularly urgent task for Tories, given they are most closely identified in the public mind with the capitalist system – and with its current imperfections. This association has actually grown over their last five years in government, and severely hobbles the party electorally. For all the talk of the first majority since 1992, this year’s majority was won on the back of just 36.9 per cent of the vote, with the party’s recovery to the 42 per cent enjoyed in 1992 still pending. The Conservative position remains brittle, depending to an uncomfortable extent upon an ongoing recovery.
But setting aside party self-interest, the great task identified by Tim Montgomerie of properly evangelising for capitalism needs to be taken up – and not just here in Britain. As his report emphasises, capitalist democracy has been and remains essential to the development and dignity of mankind, providing mass prosperity and political freedom for millions. For as long as current levels of disenchantment prevail, both the validity and security of the system are in doubt. Whether it is right for millions of Britons to be subject to a system they have significant objections to is huge moral question in itself, but it is the consequent susceptibility of the electorate to anti-market political recipes that provides the real danger to the whole edifice upon which mass prosperity has been built, and can only be built.
Ironically enough, considering the self-acknowledged Marxist leanings of its new leadership, the task of reforming capitalism is one to which Labour is actually well suited. Traditional social democracy was essentially a doctrine of heavily tamed capitalism, while pragmatic trade unionism secured the best conditions for the workers within the market system. Under Jeremy Corbyn, however, such possibilities cannot be seriously entertained. Comrade Corbyn is a socialist in the genuine sense, one opposed to capitalism in principle. His is not the vision of Blair-Brown, or arguably even of Attlee, but rather of Tony Benn and Arthur Scargill, whose platforms in the Seventies and early Eighties threated the effective abolition of the market economy in Britain.
This leaves the Tories. They have powerful electoral and ideological incentives to reform the market, but do they have the will to accept a bigger, more redistributive role for the state? Despite great efforts to promote job creation and lower taxes for low earners under the Coalition, and the announcement of a new National Living Wage in July’s Budget, one could argue the Tory leadership remains unprepared to promote a thorough “reform of capitalism” agenda. The outright refusal of the leadership to consider wealth or “mansion” taxes as a means to a fairer tax system (with a greater burden on wealth rather than income); the cuts to working tax credits; and the privileging of retirees with “triple-locked” state pensions and other benefits, all are good examples of it. When the Chancellor promotes an inheritance tax threshold increase to a huge £1 million (on a family home) the government’s rhetoric of “rewarding aspiration” rings hollow. Equally, new restraints in the government’s Trade Union bill can again be seen as a reflexive backing of employers over workers.
The unthinking conservatism of some free enterprise supporters, who view any challenge to laissez faire as creeping socialism, emerges as a central theme of Montgomerie’s Legatum report. Sensible, genuine Tories can easily avoid this pitfall. Edmund Burke, the indispensable prophet of Anglosphere conservatism, put it best when he argued that “a state without the means of some change is without the means of its own conservation”. So it is with capitalism.