Free wifi, courtesy of those selfish capitalists

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TFA WEEKEND COMMENT

The drive to succeed has created innovations that have improved our lives in countless ways. Despite the bad press it receives, and in contrast to many state-controlled projects, only capitalism has consistently harnessed this drive for the common good.

Virgin Media recently announced a plan to offer free wifi to everyone in the City of London. In doing so they illustrated the way in which we often benefit from the drive of companies and entrepreneurs to succeed and expand their business.

Virgin’s plan is intended to compete directly with the better-established BT Openzone, British Telecom’s nationwide network found in many cafes and public spaces. Their aim is to offer free wireless access to everyone in London, with an enhanced network available for Virgin customers. By contrast BT Openzone charges for access, with some free options available for existing BT subscribers.

Recently others have embraced this trend. The sandwich chain, Pret a Manger, now offer free wifi via the specialist wireless provider The Cloud, and Caffe Nero are following suit over the next few months, replacing their existing fee-based provider, also BT Openzone.

This drive to compete is standard behaviour for the private sector. It is the method by which companies attempt to find new ways to attract customers. They are innovating, and in doing so they hope to expand their opportunity to make profit. For this to succeed their offering must have some tangible benefit to tempt us; it must be faster, cheaper or better. In the case of Virgin they are establishing a wireless network like BT, but their innovation is free use.

This trend is seen everywhere a relatively free market is able to operate, and tends to cause a domino effect. Once someone offers something new to gain personal advantage, competitors are obliged to follow suit, and we benefit from the need for everyone to keep up. In short order what was once an innovative edge becomes commonplace, just as free web browsers and email services are now the norm from technology companies.

Given the key role innovation plays in ensuring progress it is difficult to understand why capitalism, and the many improvements it brings forth, receives such bad press. Much of the criticism of it focuses on the intent of the businessman or entrepreneur and clearly ignores the end result. One intent in particular is often highlighted – the natural desire for a business to increase profit.

This selfish motive can be contrasted with the apparently noble intent of public service. By removing the profit motive from individuals in organisations we aim for a more humane method of providing goods and services. The implied notion of cooperation is then contrasted with the explicitly competitive nature of capitalism.

This analysis misses the point of capitalism, and dwells upon on one aspect of the process to discredit the overall effect. The drive to succeed that encourages businesses to compete with one another is exploited by us, the consumer. Their personal motive is irrelevant because their actions are designed to serve us – the only way they can make money.

The interplay between offering products and services, and us withholding payment, creates a dynamic that not only drives down prices – to zero, in the case of Virgin’s proposed wifi system – but encourages further innovation. That is, they must keep improving things we want in order to stay in business. There is rarely the equivalent process in the public sector for the simple reason there is no threat that we can withdraw payment. We must pay regardless, and only complain about shoddy work after payment.

Where this profit motive is lacking is where we often see indifferent performance. There is little impetus to innovate in the public sector because many of the services are monopolies. Why try something new, and risk failure, when what we have is fine? The same effect is observed in the private sector where a company has a temporary dominant position, much like British Telecom. They too become conservative and risk-averse, shunning innovation in favour of exploiting the products and services they currently offer.

The key force at play is the drive to succeed inherent in capitalism, manifesting itself in the desire to increase profit. This in turn pressures the complacent to improve their offering or give way to those who serve the public better. Therefore, the selfishness of the businessman has an overall positive effect because it constantly challenges the status quo. By ignoring this we then squander the vast potential of humanity to improve and better society through many small, incremental changes.

When the focus is on intent and not output much of the dynamism of capitalism is misunderstood. The capitalist drive creates innovation and choice, and because we cannot be compelled to buy the products we have the final say in what succeeds or fails. It is a form of direct democracy that by its nature must respond well to the needs of the people it aims to serve or face an immediate penalty.

In an era when capitalism seems to have few defenders, and where those that defend it do so apologetically, it is important to highlight the ways in which society can benefit from a free market. Our aim should be to harness this drive for the common good, and not to speculate on motive. The goal should be to realistically exploit the natural desire of businesses to compete, rather than be sold on the virtues of a fantasy utopia. Only capitalism allows us to do this while retaining direct control, and it is an endlessly flexible system that can be applied to any human endeavour, from wireless internet to healthcare and education.

By Gerard Docherty