21 September 2015

Capitalism must make the moral case


The advent of Corbynomics in Britain, following the election of Jeremy Corbyn as leader of the Labour Party, means the moral case for entrepreneurial capitalism is ever more important.

Jeremy Warner was undoubtedly correct when he referred to the economic policies of the shadow Chancellor as deriving from ‘cloud-cuckoo land’.  Indeed that was his second, and more moderate, description. Few of us who believe in a market-based, free, entrepreneurial economy, will need persuading of the ‘fantasy world’ or ‘parallel universe’ of so-called ‘Corbynomics.’ Some of the stuff is bizarre.  Even more dangerous is the moral claim of superiority, a claim that rejects ‘cuts’ and ‘austerity,’ ‘inequality’ and ‘unfairness.’

There, however, lies the problem. Fairyland has come closer. This poses a number of very distinct dangers which means that the continued articulation of the case for entrepreneurial capitalism, one built on the soundest of ethical and moral foundations, is ever more important.

The problem is as follows:

  • Conservative economic policy has been driven essentially by pragmatism; in a battle of ideas, it might look weak and unprincipled
  • The attractiveness, albeit superficial, of populist left-wing policies should not be underestimated.

Let me unpack these in turn.

First then, ideas versus pragmatism. Jeremy Corbyn is an ‘ideas’ person. I do not agree with most of his ideas. Jeremy believes what he says, he believes in the case for socialism. However, the first task of a political or economic philosophy is to win the battle of ideas. The problem arises because the Conservative party has over the last 30 years largely abandoned the intellectual contest in favour of pragmatic populism – that is, what economic and political levers can we pull to ensure just enough votes to deliver electoral success. Politically, of course, it is understandable. Indeed in the Blair years, pragmatism met pragmatism in order to see which side could tip the scales this way or that. Blair won. The Tories responded not with ideas and vision but more adjustments at the margin. In the years of coalition, it was, I suppose, death by pragmatism given the extent of compromise and horse-trading that was necessary.

What do I mean by pragmatism? Here are some examples.

  • Over-emphasising a reduced deficit whilst national debt continues to rise
  • An unthinking commitment to 0.7% GNI (gross national income) on international development
  • Raising income tax personal allowance thresholds but not those for national insurance
  • Fiscal drag pulling millions into higher rate tax bands

Without vision, the people die. That is actually a quote from the Bible (Proverbs 29:18). I am not remotely attracted to Mr Corbyn’s economics, but government policies, economic, fiscal and monetary, need to be set in the context of a compelling vision.

Secondly, this is reinforced by the superficial attraction of populist left-wing policies which we underestimate at our peril. We fail to see the surface-level appeal of both left-wing and right-wing populism. So, from the Left, rent controls, energy price freezes, nationalisation of the energy supply companies and train operating companies are hugely popular, however misguided, and, shocking as it is, even the nationalisation of the banks. State bail-outs of private sector banks may not have helped out the intellectual case.

The point is that the Conservatives and others who believe in an enterprise economy rarely make an intellectual and moral case for such an economy based upon low taxation, the encouragement of SMEs, a flourishing voluntary sector and a small state. Rather we fiddle at the margins just to make the policy seem marginally more attractive than the alternative. So long as the Left do the same, whilst the outcome might be 10-15,000 pages of tax legislation, it becomes a race to the bottom, who’s tweaks are most appealing.

However, when the Left present an ideas based approach to the economy, an intellectual argument for socialism, coupled with the policies of Left-wing populism, I may not agree with any of it, but in the eyes of many, those arguments make the policies of the Right, based upon pragmatism and marginal adjustments seem extraordinarily weak.

The arrival of Mr Corbyn and his team has one advantage then; it puts this debate centre stage. The question is whether we are ready to respond to the intellectual challenge or will flounder in our response. We fail to combat the pernicious ideas of socialism because we lack a moral vision for enterprise and entrepreneurship and an intellectual framework to articulate it. Without such vision we are reduced to defending corporate cartels rather than promoting popular capitalism. We cede the moral high ground to the socialist creed which has impoverished millions.

The moral vision for an enterprise economy is one in which individuals, families and small companies flourish, creativity, innovation and aspiration encouraged and responsibility, personal and social enabled.

There is no more of a moral case for a private monopoly than the state controlling the means of production. This vision also means understanding the supply-side of the economy. The answer to corporatism is competition. The most dynamic route to wealth creation and employment is to encourage investment by small and medium enterprises, business expansion and reducing the burden of regulation. So perhaps Corporation Tax should be abolished for small companies, employer’s national insurance cut and perhaps we could in certain circumstances (entry-level posts rather than simply below a certain age) reduce the minimum wage. Shock – but policies should be driven by vision, not simply pragmatism.

A vision for an enterprise economy is also one of individual aspiration. To desire individuals to flourish, to keep a larger portion of their income, to take responsibility for their families, to become entrepreneurs and create wealth are moral arguments. A high tax economy is – contrary to the argument of the Left (and indeed of the Bishops of the Church of England) – immoral because it stifles individuals and families, removes individual responsibility and very often, in any event, fails to achieve desired social outcomes.

A vision for an enterprise economy is built on equality of opportunity, not equality of either income or outcome. An enterprise economy does imply also a vision for a small state. We have no reason to be scared of that, indeed there is nothing especially moral about a state that runs an ever-increasing national debt and passes the burdens of today to the generation of tomorrow. In addition, we need to cut the size of government. The Cabinet (and those with rights to attend) seems to grow exponentially. When will we have a government that abolishes departments (and doesn’t replace them or morph them) and please, please can we have a government that doesn’t feel the need to legislate all the time?

Here are a four significant moral reasons for a market enterprise economy:

  • The market has delivered millions of people worldwide from poverty

The quest to remove the peoples of the world from poverty is an honourable and noble one. Unfortunately poverty has become confused with inequality. Large-scale inter-government transfers are often ineffectual in promoting development. The World Bank Global Monitoring Report notes that the number living in extreme poverty ($1.25 a day or less in constant prices) has halved since 1990. Obviously there is more to so, but the World Bank notes that economic growth (sustainable and inclusive) and employment are the key drivers.

  • The market has provided staple products at accessible prices

In the 1840s Lord Shaftesbury, elected to Parliament to defend the agricultural incomes of Dorset, changed his mind on the ‘corn laws.’ He did so because he understood that the availability of staple products such as bread at cheap prices was central to ending poverty.

  • The market provides opportunity for human dignity by enabling creativity and innovation

Human dignity is enhanced by work, by providing for families and by encouraging the exercise of skills and gifts. This leads to personal responsibility and community responsibility. The market allows for these opportunities to flourish in ways that central planning and command economies stifle. Equality of opportunity is a noble and moral goal; an over-obsession with equality of income diminishes rather than enhances human dignity.

  • The market enables responsibility, compassion and social justice

It is a common fallacy of the Left to think that compassion, protection of the vulnerable and social justice can only be achieved through the State. Of course there will need to be safety nets, but our over-bearing welfare state has destroyed human dignity rather than enhanced it by encouraging dependency. There is nothing moral about dependency on the state. Rather a dynamic voluntary sector, a flourishing economy, a vision for aspiration together with the encouragement of responsibility to the community will – alongside a necessary safety net – be the most effective ways of achieving social cohesion, mobility and justice.

Corbynomics is not just bad economics, it lacks a true moral vision.

The vision for an entrepreneurial, aspirational enterprise economy is compelling. We just need to make the case.

Revd Dr Richard Turnbull is the Director of the Centre for Enterprise, Markets and Ethics