Capitalism is still the best system there is

First published in the Financial Times on 15th May 2012.

Do activists think new products and services appear thanks to government?

Are capitalists clinical psychopaths? An essay in the New York Times by a literary critic implies they are. William Deresiewicz wrote that capitalism is predicated on bad behaviour, including “accounting fraud, tax evasion, toxic dumping, product safety violations, bid rigging, overfilling, perjury”. His premise is that the free market is amoral, and that capitalist values are antithetical to Christian ones.

Such outbursts, like the Occupy movement, and even the recent election of a Socialist president in France, are the products of spoilt societies that are in denial. Widespread ignorance about how material progress is achieved mean academics, politicians and union leaders are whipping up hatred of wealth creators of all kinds.

Do such activists think new products and services appear thanks to government intervention? Where do they think the money to pay for roads, schools, police and hospitals comes from? Do they believe that consumer innovation, technological advance and the funding for taxation emerge from the saintly public sector? Why is the profit motive seen as wicked, while working in places such as universities appears so very ethical?

Perhaps the hatred stems from envy, perhaps from a foolish snobbery towards “trade”, perhaps from a pathetic fear of going out and actually selling goods for a living, or perhaps from the common tendency to bite the hand that feeds. I worry that western societies’ generous welfare systems have made us so comfortable that too few have to visit factories to discover what commercial production really means, or see what happens when the capitalists leave – the private sector withers and there is no investment or lending. Greece is surely going to find out in the next few years, and the experience is likely to be unpleasant.

Economic affairs are cyclical, but this generation is so prosperous that it finds the prospect of a long recession almost too much to bear. We are all used to having a safe job, our own home or housing support, foreign holidays and all the rest. All this munificence is only possible because free enterprise incentivises entrepreneurs to build companies. From those undertakings flow work, exports, tax and the other elements which form modern civilisation. Disown all that, and the edifice crumbles. This appears to be what Greece is doing – embarking on a course of national suicide, thanks to a gargantuan sense of entitlement and dependency.

The usual cures to the “evil” of capitalism are put forward in the NYT article: more legislation, regulation and taxation. Yet those countries that are creating most jobs and seeing rising living standards – such as Brazil, Turkey and China – exact far fewer tolls on companies than we do in the west. The brilliant anti-business intellectuals would solve our problems of unemployment, debt and stagnant wages by doing the opposite of the policies adopted by the world’s most buoyant economies. Meanwhile, leftwing economists suggest that the cure for government deficits is even more debt.

That these assertions have found traction with electorates is depressing. Possibly, capitalism is poor at promoting the cause and explaining its merits. We need to counter myths propagated by the left that “shafting your workers, hurting your customers, destroying the land” is how the system works. If it were, every company would go broke.

No doubt most highly successful entrepreneurs are tough individuals. Some break the rules, but damning an entire class for the high-profile errors of the few is destructive and ill-judged. And this is the age of the whistleblower – if they were all crooks, surely they would get caught.

Moreover I suspect top professors, doctors, editors, architects, scientists and those at the summit of every profession are just as competitive and egotistical as leaders in the worlds of commerce and finance. I’ll bet that ruthless ambition – for fame, power and even money – is just as common in labs, lecture theatres and surgeries as the boardroom.

I suppose everyone facing hard times wants scapegoats for their present difficulties. Capitalism, bankers, entrepreneurs and the like all seem like suitable targets for blame. But if we abandon capitalism for collective ownership and central planning, we really will be acting like psychopaths.