Capitalism

There is a great deal of misunderstanding about what constitutes Right Wing economics. The Left sees a world dominated by Big Business getting away with

  • not paying their fair share of taxes

  • lobbying to get the market rigged in their favour

  • getting huge subsidies from Big Government paid for by the taxpayers

But this is not free market capitalism.

Right wing economics is about the freedom of individuals to pool their capital and make a profit; or to lose everything.

Right Wing economics is about supplying what the consumer wants or needs. The capitalist makes money because people are prepared to pay for the goods or services supplied, at a price they are prepared to pay.

If the capitalist does not supply goods and services people want, or can afford, then that is the end of his or her business.

Capitalism is fundamentally democratic. People vote with their wallets and bank cards! And it is fundamentally responsive. Where a market emerges, a supplier will emerge too. There is no more fundamentally efficient system of supply; because, as Adam Smith observed, it is all based on self interest.

Legitimate self interest, that is.

When Big business lobbies big government in Washington and in Brussels, Europe, in order to fix the rules in their favour, they are not operating a free market; they are rigging the market.

Big Business advertising is not so much about informing us of the availability of goods and services, but a psychological device to dictate our reactions and incite consumption.

In a true capitalist free market, the consumer is the boss, not the supplier. The consumer decides, not the supplier. A free market capitalist will meet people’s needs and wants; not try to frame those needs and wants.

A true capitalist sets up business to allow for all the inevitable expenses, including taxation. The true capitalist sees where the market is going and follows it.

Today,  Big Business is often in bed with Big State, doing deals to get tax breaks, to get taxpayer funded subsidies, to get regulations passed which suit them. Incidentally, Right wing thinkers have a term for this: they call it Crony capitalism.

Big State likes to control. That is the essence of Socialism. State direction and State control. And Big Corporates like to control their markets, too. They want guaranteed profits so they can guarantee a return on the investment made by their shareholders –  big investment funds desperate to guarantee a return to their own investors.

But investment in a free market  is not guaranteed to deliver. It is a risk. And because it is a risk, enterprise has to make sure its business is viable.

Legitimate viability is when a product or service meets demand. Such viability does not need to rig the market, or make preferential tax deals with governments or demand that the government pay them subsidies as the price of investment.

Such activity is not just immoral, but anti free market.

Such co-operation between Big State and Big Business is a feature of fascist economics, not free market capitalism …

In 2008 the world witnessed this on a massive scale. Big banks started to fail. In a free and responsive market, that’s a good sign. The corrective is working. The inefficient, the stupid and the corrupt go down.

Good.

But what did Governments do ?

Because western governments are accustomed to the Socialist doctrines of intervention in the market, they moved in to save banks.

In the UK, the government actually bought into the worst of the banks.  Instead of letting it fail, they bought into it !

Needless to say, years later we saw the inevitable result. They sold off taxpayer funded shares for a fraction of the price. The British taxpayer paid the bill for saving a rotten banking operation.

Particularly disturbing, Governments responded to the crisis by having their central banks print money. They did that in order to buy up the toxic debt foolhardy banks had invested in.

In a free market such banks would be allowed to fail. In a free market the example of one bank failing would serve to remind all the others to operate prudently and morally.

But we have lived with a climate of State intervention for so long that banks expect to be bailed out. So bad practice continues. The guilty are not brought to justice, and the connivance at bad practice goes on and on …

We are witnessing the dominance of corporatist culture where everything needs to be pinned down and guaranteed. That is the opposite of a free market where bad practice reaps its due reward: failure. In a free market the situation is by nature fluid, not rigid and predictable.

The Right also wants the State scaled down with less regulatory intervention and less taxpayer money wasted.

People should be free to spend their money as they wish. They should be free to take responsibility for their own lives – and that means taking the risk that they will fail and learn the vital life lessons from their failure.

In Socialist-type economies, the State takes charge.  So the State takes more in taxes because it has more officials to employ to enforce the increasing number of regulations, and to run the government departments spending more of taxpayers money. 

Enterprise is then penalised because taxation increases.

An example. High Street traders in the UK are paying excessive local taxes so stores on High Streets in major town centres are closing. In part this is the effect of legitimate competition from Internet companies.

But there is an element of false competition involved here too because the Internet companies have negotiated special tax deals with governments. And Internet companies can negotiate special local deals to set up shop.

This happens in France where this writer lives.

In France all businesses have imbibed a Socialist ethic and culture. They expect State subsidies in order to be able to operate …

So the State entices businesses which should need no ‘incentives’. And the money the State spends either comes from the taxpayer [you and me !] or it comes from taking loans from international financiers.  And who is then placed under an obligation to pay back loans to the State ?

It should, of course, be the business which has been set up; a business which should be so  viable and independent, it can pay into public funds from its profits. 

That’s the case in a free market.

But in reality it is us, you and I, the average consumer and taxpayer who end up paying for businesses to operate. In a proper capitalist free market, a viable business will thrive, paying necessary and reasonable levels of tax. In a rigged market, however, businesses which should be standing on their own feet get paid, viable or not !

Does that mean the State has no role at all, then?

No, it does not mean that.

The State has a duty to ensure a fair and even playing field. It has a duty to ensure the same standards and laws apply to everyone. The State should ensure what it primarily exists to ensure: the security of its people in their lives, liberties and property.

A State ensuring a level playing field fair to all, would not intervene as an actor in the market to distort the free flow functioning of the market by giving tax breaks, and subsidies and preferential regulations.

Where the State itself is involved in procuring projects it should be particularly vigilant. It should ensure constant and independent scrutiny of the officials and businesses involved. And there should be criminal sanctions in place where public money is at stake – indeed where any investors money is at stake.

In 2018, Carillion, a multi £ billion corporate supplier to the UK government went broke. Investigations have shown that officials, directors and even auditors failed seriously and successively to take appropriate action in the face of emerging problems.

The fundamental problem was a corporatist mentality: no-one took responsibility; it was seen as too big too fail; it was “guaranteed” by having large scale government contracts. It manifested the complacency we associate with bureaucracy, not the flexibility and adaptability of an enterprise operating in a free market which must deliver a good service or product, on time and at a good price.

So yes, the State does have a role. It should ensure fair play so that a truly free market can operate efficiently and responsively.

Policing the market is one thing, however; controlling and directing the market is quite another. And the State invariably lacks  the right skills and culture to do that.

For an excellent introduction to the real meaning of Capitalism and its benefits, see a new Primer of Capitalism by Dr Eamonn Butler [Director of the Adam Smith Institute] and available from the Institute for Economic Affairs at

https://iea.org.uk/publications/an-introduction-to-capitalism/

For what’s wrong in the perception and practice of Right Wing economics today, see an article by Dr Victoria Bateman at

https://unherd.com/2017/07/capitalists-not-socialists-killing-capitalism/?=refinnar

Ray Catlin

Copyright © 2018 Ray Catlin. All rights reserved.