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Is Free Market Capitalism Still Fit For Purpose?

12/10/2017 17:57
Darren Staples / Reuters

Are we paying too little for things? No, seriously. The reason to ask is the collapse of the long-established and popular Monarch Airlines.

We seem to be living in an era where what is prized above all is prices being driven down. The result is that more firms are making less money. So, when they hit a wobbly patch they can't survive.

This matters. The collapse of Monarch left 110,000 people stranded, the taxpayer picking up the tab to get them home, and ruined plans for a further 750,000 holidaymakers

We have also had some disturbing revelations recently about the way chicken is being processed, not to mention the horrendous fire at Grenfell Tower. Unconnected?

What they all have in common is someone, somewhere saving money, apparently at any price, for whoever might benefit: consumers or owners. It didn't seem to matter. This indiscriminate cost cutting culture needs to change or capitalism, the foundation of modern society, will fall so far into disrepute that all sorts of demagoguery could be unleashed. This has, after all, happened before, albeit for different reasons, in the 1930s.

We make a deal with Mammon these days: Money for services fit for purpose, fair, and fail-safe. We do not pay for corners cut, risks added, failure likely.

An existential endgame seems to have been reached with our neo-liberal consensus. When even the Financial Times runs an article wondering whether 'lax regulation has turned Britain into a rentier's paradise' we really are in trouble.

There is, of course, the argument that in a well-ordered free-market world businesses ebb and flow, rise and fall, and constantly stress test the limits of regulators. The questions is whether that world is, in fact, now running efficiently.

A good litmus test for the state of an economy is the state of its politics. In the UK, there is a crisis of identity being played out by political parties. A nation that voted (just) to leave a union with others in order to shape its own identity seems unsure what that identity actually is.

Are we Leftish welfarists? Or, wait, no, make that Rightish freewheeling, free market buccaneers. Thankfully, at least there is The Great British Bake Off to unite behind.

And none of this is new, of course. In 1844 Friedrich Engels, the Marxist co-founder and philosopher, noted the woes of the "propertyless millions who own nothing and consume today what they earned yesterday." Meanwhile, industrialists made fortunes on the "misery of the mass of wage earners."

Capitalism can and does self-correct. That has been its beauty and answer to Engels and Karl Marx. But capitalism has to deliver more than a philosophy. It has to deliver prosperity. If it fails to do so, then it falls quickly into disrepute. People panic more about poverty that philosophies.

As we see food banks in places that seem affluent, poverty asleep in shop doorways, and property ownership beyond the reach of an entire rising generation, a panic is setting in. We might reasonably ask where the usual self-correction has go to?

Those now reaching early middle age still unable to buy homes, a process which has allowed generations to build up capital reserves and borrow money advantageously for other reasons, may wonder whether having enough cash to keep buying 'artisan' produce is enough of an exchange. And they are, indeed, spending all that they earn on day-to-day living, even if that living is comfortable. The truth is that whole sections of society feel and are deracinated from their aspirations.

So, an airline has collapsed in a world where we all seem to be enduring a very bumpy ride. It may come to symbolise more, as will the Grenfell fire tragedy and an apparent disregard for fundamental food safety. But one small lesson to start from might be that we cannot expect to keep delivering more for less money.

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