Can we revive capitalism?

Yesterday I went to an interesting event organised by Reform Scotland on ‘The Future of Capitalism’, addressed by Adrian Wooldridge (‘Bagehot’ of the Economist) and Lord Wood.  Most of their recommendations focused on fixing the vices of large companies and restoring the ‘dynamism’ of capitalism through small businesses and worker participation.  I think there are more fundamental issues to address.

The first is: is this still capitalism? It’s a question raised by Tony Crosland in the 1950s, and it’s highly pertinent to the debate.  Our economy doesn’t fit the conventional models of market capitalism in several ways.  Crosland pointed, for example, to the divorce of ownership and control, and the role of the state.  There’s a lot to add to that – for example, the role of voluntary, non-profit and mutual organisations.  (We also have some less appealing non-capitalist elements, such as the survival of pre-capitalist landholding in much of Scotland’s territory – at least 30% is still held by the landed gentry).  We have a complex, diverse, mixed economy, rather than an ideally ‘capitalist’ one.  Measures which aimed to revitalise the economy through a purer form of ‘capitalism’ may well just miss the point.

The second question: is ‘capitalism’ the source of our prosperity?  Many advocates of the market system, and capitalism’s ‘creative destruction’, believe it is; the story is not straightforward.  If we look, for example, at the housing system, people in the UK were able to live in decent housing in most cases through one of two mechanisms: the building societies, which were mutual, non-profit organisations devoted to making home ownership possible, and social housing, mainly developed through local authorities.  Many of our  current problems in that field relate to the ideological destruction of those systems.

Third: is ‘capitalism’ really the source of dynamism in our current  economy?   Successive British governments have been convinced that it must be, and that the key is independent, small business that will grow into larger businesses.  Most other countries are much more likely to have developed large industries through state aid – Mariana Mazzucato’s work on The Entrepreneurial State makes the case strongly.   And in the UK we’re apparently convinced it’s not cricket to do the same.  Our economy may be sinking, but at least we’re playing the game by the rules.

I’m generally suspicious of most analyses of ‘capitalism’.  Like Santa Claus, it’s used as a catch-all expression to explain why some of us get presents and some don’t.  Let’s talk about the  world as it is instead.

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