Jeremy Corbyn has been telling us since the 1970s, before we even had capitalism. Theresa May, who assures us she’s a fervent believer in free markets, also believes those markets are broken. Now, it’s the captains of industry who are imparting their wisdom about the demerits of the system they are supposed to be steering.
But as Mark Twain admonished, it’s not what we don’t know that gets us into trouble, but what we do know that simply isn’t so. Wherever it is allowed to operate with some measure of freedom, capitalism is working marvellously – not just for the capitalists, but for ordinary consumers and the poor.
Look at China, where the advent of markets has seen a reduction in extreme poverty, from 84 per cent in 1981 to less than six per cent today. Or Latin America, where those countries which adopted largely open markets and free trade have seen incomes after inflation more than double since 1990.
Meanwhile, those which regressed, notably Venezuela, are increasingly gripped by want, disease, squalor, ignorance and unemployment.
You may say that the development of poor countries has come at the expense of the working class in rich countries. In fact, real incomes have doubled since Britain began the process of leaving socialism behind by joining the European common market in 1973.
Privatisation and liberalisation made such consumer essentials as phone connections, electricity and travel more widespread, cheaper, and increasingly available to the toiling masses.
Consider now how much better virtually every item of daily life is compared to even a few years ago. Not just smartphone apps, but cars (safer, cleaner, more comfortable), computers (lighter, faster, with greater storage), entertainment (more varied, cheaper, of greater quality), clothing (cheaper, more differentiated).
Real wages are also rising. It’s just that more and more previously unemployed people are entering the workforce at the lower end of the payscale. This brings down the average, but doesn’t mean anyone is harmed. In fact, we’re all better off.
Compare the current state of affairs in those areas of life where capitalism is allowed to operate to the dreary condition of our health system (which keeps patients waiting and dying at higher rates than elsewhere in Europe), education system (which fails to prepare poor and minority groups adequately for top universities), and planning system (clobbered so badly by planning restrictions that pensioners are now nearly three times as likely to own their home as those aged 25-34).
That’s failure. And those are the factors increasingly sapping the confidence and happiness of people in the UK and other parts of the rich world.
The problem with so-called business leaders who critique capitalism is that they operate within bureaucracies which are as daunting as the departments of Whitehall. Their professional experience is shaped more by dealings with politicians and other company bureaucrats than by daily negotiating with financiers, customers and suppliers.
Many of them work within industries where state regulation has so constrained the competitive process that whatever profits are made do not come from customer satisfaction, but from the rents created by protection. That’s why they are prone to claim that “a fixation with shareholder value at the expense of purpose” has afflicted firms.
But the purpose of business is to deliver value to stakeholders, and the most succinct measure of value creation is profit. Profit is purpose, and purpose is the improvement of our condition, which has patently happened under capitalism.
With our politics in disarray, our public services depleted of efficiency, and the international order disturbed by all manner of shocks, the appropriate question is not whether capitalism is working, but: is anything other than capitalism working at all?
This article was first published in City AM.