In defence of capitalism

Last week, I wrote about a possible justification for limited nationalisation of the most important parts of our infrastructure. To redress the balance, I want to consider whether there is any reason to retain capitalism as a form of creating everything else we need to survive and thrive as a community.

This is not the place - nor am I the person - to give a lesson on economics. However, it is worth noting that the economy has, since the beginnings of the last century, developed into a partnership between (the owners of) capital, (the providers of) labour and government (who regulate commercial activities).

But arguably, this distinction is no longer anything like as clear as it once was. During the eighteenth and nineteenth centuries, when capitalism and the industrial evolution were getting going, the distinction between labour and capital were relatively obvious, while government seemed unwilling,or unable, to provide effective regulation.

The situation during the twentieth century and into the current one, gradually changed - although this has never been recognised by communists or some fellow travellers, for whom the doctrines of Marx and Engels made such a conjunction impossible - so that labour and capital have become far more closely interconnected.

This has come about as the result of two main influences.

The first is that regulation of businesses has enforced far greater consideration of the impact their actions and decisions have on employees. Such matters as the National Minimum Wage (soon to be supplanted, perhaps, by a Living Wage) are the icing on the cake, building on legislation relating to safety, holidays, job security and, latterly, equality. While this is important, from the perspective of the workforce, it is more a reflection of businesses being forced to do what is right, rather than being a fundamental change.

What has really changed the world of finance, is that the division between capital and labour has become increasingly irrelevant, except to those extremists for whom the class war as as relevant today as it was when the Labour Party was born out of the Trades Union movement. This second influence has been brought about by the need of pension schemes and insurance companies to invest in shares as part of their investment portfolio. (A trend for which John Maynard Keynes, once Chairman of insurance company National Mutual Life as well as a leading economist and government adviser, was largely responsible.)

This investment of individual's collective savings and pension funds now means that the fortunes of everyone's financial future depends very much on the performance of the businesses in which they are invested. Every time workers outside the public sector strike, they are harming the businesses they themselves indirectly own. Every time workers within the public sector strike, they are harming the economic environment within which the businesses they own can thrive.

This is not to say that those who run business are always right - or that withdrawal of labour is always wrong. Rather, it should be a recognition that cooperation and more consultation before big decisions are taken should be far more prevalent than they seem to have become.

Capitalism is not 'wrong', but neither is it perfect. But it is what we have until something better comes along. And that is still science fiction.

---

Stephen Phillips is a member of the Shepway Liberal Democrats, and his views are not necessarily those of the Party. He has been writing professionally for many years on investment and economic related issues, and has focussed recently on creative writing.

You can find Stephen online at www.phillips-writer.co.uk