The leaders of all the main political parties have embarked upon a crusade to improve the economy by improving capitalism. Amid calls of obscene salaries, uneven distribution of wealth and publicly-owned banks we are seeing the emergence of political tinkerers who believe they have the answers to the complexities of advanced economies.
The Deputy Prime Minister, Nick Clegg, has launched a campaign to encourage businesses to consider employee ownership schemes. Using the cooperative model of John Lewis as his template he has claimed it encourages greater productivity and is a fairer mechanism with which to conduct business. The initiative may extend to regulation that obliges employers to consider new ownership models.
His calls have been echoed by other leading politicians, including the Prime Minister, with ideas that include a promise to clamp down on ‘excessive’ pay, a belief in better or fairer capitalism and a promise to curtail ‘crony capitalism’. The goal, then, is to manage the market in order that it works better to create a fairer society.
Since the advocates of this brave new capitalism lack business experience we cannot say they are motivated by personal knowledge. What then is the driving force? Why would political animals wish to control the market?
The short answer is popularity. By pandering to the belief that the successful have won unfairly they score a cheap point. It may risk the more serious charge that by doing so they damage the goodwill of wealth creators, but it serves an immediate purpose, the perceived need to appeal to the masses on issues that resonate. The resonant issue being envy.
The Deputy Prime Minister’s view, that cooperatives are more productive, is certainly the view of John Lewis’s staff, who celebrate their model as one of the drivers in the company’s success. However, it is a simplistic view that ignores the fact that both Marks and Spencer and Debenhams, key rivals to John Lewis, have a traditional ownership model. As ever, the reality is more complex.
In a less regulated market it is easier for different business models to exist; it is easier for entrepreneurs to experiment. It is the greatest of ironies that instead of promoting this – making it easier for new businesses to start up and compete – we see Nick Clegg fall back on his left-wing instincts and suggest government intervention can help reset the balance in favour of ‘fairer’ ownership models. That is, we need even more of what has damaged the economy in order to broaden the range of business types we see operating. The government, and not the market, will decide.
Much of the business community would advocate the opposite, that the government instead do nothing. More accurately, that they act to prevent things being done. They would argue that the more pressing need is to create jobs, since being the recipient of questionable rights to ownership means little when unemployed.
Clegg’s urge then is popularity, not efficiency – the real driver in a free market and the basis of any strong economy. The efficient business competes successfully on price, quality, availability or whatever factor is of most interest to their customers, thereby providing an opportunity to expand and employ more taxpaying workers.
His urge is similar to the misdirection we see in socialist systems, where the economy is bent out of shape to achieve egalitarian aims. Whether it be full employment or special conditions for workers, they fail because they miss the point of commerce. It is therefore foolish to believe that the threat of legislation to achieve populist goals can improve the economy long-term, as it is just a variant on redistributive systems that seek to put money in the hands of those who have not earned it.
But the real fools are us for allowing professional politicians to condemn businessmen in order to appeal to infantile notions about economics. The path of ruin that lies behind us is matched only by the one in front, where inexperienced amateurs entice the electorate with ever more promises of fairness: fairer wages, fairer lives and now shares in the company, as if business were one long dividend without risk.
It is to this we must look – the role of risk in life. As a society we have been encouraged to turn our backs on individualism and to look to those who promise ever more safety, security, fairness and perfection, all of which can be provided with a sufficiently strong political will. The recent comments from leading politicians urging businesses to consider share ownership schemes ignore the elephant in the room, the fact that anyone, including employees, can already buy shares in any publicly-traded company. All they must do is accept the risk of failure; that their investment may not reap dividends.
It is therefore the perfect microcosm of our political system. It pretends everyone can win; that the masses are excluded by the wealthy and not by their own choices. The opportunities are already there, but they require us to take personal responsibility for failure, a message our political class know is incompatible with the fairness agenda they exploit to achieve their own ambitions.
By Gerard Docherty
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