Fairer Capitalism?

Much is being made of the meme spreading through politics, the media and various soon to be evicted campsites about the need for capitalism to be moral, fair, responsible, call it what you will. Ah yes, say the politicians, we hear what you say, something must be done. And of course it is impossible for them to say anything else. If they were to argue that capitalism is fine as it is then they would be lynched.

But what exactly do they want to do? What aspects of capitalism do they most object to and what do they plan to do about it? No doubt Forrest would like to create dozens of regulators to pore over the actions of corporate Britain and create fairness by committee, although one man's fairness is another's impertinent intrusion.

This is not to say that the state shouldn't regulate, legislate and adjudicate the market. It does that already, albeit not always well, which is something we should bear in mind as and when Labour start coming up with solutions and policies rather than soundbites. The solution to excessive executive pay ought to be to empower shareholders, the owners of these companies, to rein them in or insist that they earn their remuneration and reject the argument that these executives are in such demand around the world that they can effectively dictate their terms. As so often however, it is simply not as simple as that most of the time.

But regulation can and does work, albeit often slowly. The recent announcement that airlines are going to have to curtail the sharp practice of charging us for paying for our flights with an additional charge is a fine example of the system working. The airlines found a lucrative loophole which has now been closed. What they will now do is what they are doing already, use various other ruses to part us from our money, like asking us to select a seat or check in when we don't really need to. Most canny and reasonably intelligent consumers see through such measures. Publicity is the best way of ending these practices. I for one will never fly with Ryanair because I object to being shamelessly fleeced by an operation which is effectively a flying cowboy operation. Ultimately withdrawing our custom is the best way of bringing cynical companies into line. If a company were to start an advertising campaign promising that the price on their website is the price you pay with any extras clearly explained then perhaps others would be forced to follow suit.

And the same is true of the utilities, like our rapacious energy providers. They use a confusing array of tariffs to bewilder all but the most mathematically gifted and patient of consumers. Arrayed against them however are all of those price comparison websites that have shot up and are much more helpful than the useless state regulator, which ought to be setting out a system of uniform tariffs that energy companies must use so that people can compare prices in a clear and readily understandable way. Obfuscation is the enemy of competition.

Companies are out to maximise profits, pay as little tax as necessary and grab as much of the market as they can. Consumers want to buy those products or services if they are available at the right prices and provide the quality required. So far so easy. That is how capitalism works. It is why it remains the most successful way for humans to get what we want at a price we can afford, which drives growth, jobs and innovation.
What politicians don't want to admit is that capitalism is just a reflection of human nature. That is why it works and why it can sometimes go so terribly wrong. We are all ultimately selfish beings who are out for ourselves and our nearest and dearest. Companies do it and so do consumers. In a perfectly balanced world they even each other out. All that politicians and regulators can reasonably hope to do is ensure that the scales are working properly.

Where politicians like Forrest become confused is when they start imagining that those in the public sector somehow have purer motives than the rest of us. Apparently they haven't noticed the way that public sector unions try to hold the country to ransom to improve their own terms and conditions at the expense of the rest of us, from tube and train drivers to doctors as we have seen this week. The reason they get away with this is because they are operating in a marketplace that lacks competition, rather like the energy companies that Forrest criticises. Where the law of supply and demand ceases to apply someone will seek to profit from it. In the private sector these are called cartels and they are outlawed. In the public sector the unions ruthlessly exploit them and demand that they never be diluted. They even pay for politicians to help ensure this cosy position remains unchallenged.

And those same politicians are not above using their positions and status to enrich themselves on the public purse. The MPs expenses scandal may not have been the sort of corruption we see in other countries but it was part of the same affliction. It is hard to take seriously the complaints of our political class who go into this cosy, cossetted world from an early age, get their safe constituencies sewn up by glad handing the right people and then spend the rest of their lives passing judgement on those who do similar things. Yes the way corporate salaries are decided and failure rewarded is scandalous and should be addressed, but then so should the way our politicians self select and protect one another. How are they any different?

The world got into a mess in 2008 because the market for debt got out of control and a bubble was created. For this, greedy bankers should take their share of the blame. But so must the rest of us. We all got carried away. The world believed the hype. We believed that the money was real and that we could go on spending what we were not earning. Politicians were as much to blame as any of us because they spent the tax proceeds on bribes for us to keep electing them and created an ever more unaffordable entitlements culture with it. It was not capitalism that failed, it was a textbook example of human nature let rip.Why is it okay for prices of housing to keep rising so that we can keep borrowing? This was not victimless. Millions of people now unable to afford their own homes were the victims of this boom and of the Nimbies objecting to the millions of houses being built that we so desperately need.

Life and marketplaces are not fair. They are never going to be. Some people, born with the ability to run and kick a football but not overly blessed with charm, will nevertheless earn fortunes. The same is true of those who can write and persuade millions to buy their books. Others, blessed with less saleable abilities, which may nevertheless advance humanity and teach us new and fascinating things about the universe, will have to satisfy themselves with a modest salary and a sense of achievement. That's life.

Capitalism, like democracy, is very far from perfect. But it is the least worst system we have yet devised, principally because we didn't devise it at all, we just let it happen and then tinkered at the edges when things went wrong. And things will always go wrong. Capitalism is about spotting gaps in the market and exploiting them. Sometimes it invents things like smart phones, iPads, ABS braking in cars - all things created by people to earn them money and rapidly copied by competitors to save losing market share and thus bring innovations to the masses.

On other less laudable occasions companies find ways of making a fast buck by pulling the wool over our eyes. Fortunately we live in  a connected world, a world of lightning fast communication in which journalists, bloggers and angry consumers can inform the world of these ruses and close them down. Ultimately good companies that want to keep their earnings year after year do not want to ruin their images by performing shoddy services or making inferior products.

Politicians themselves are part of a market place and that is why they are now competing to own and control this prime piece of political real estate. The difference between them and the companies they are now threatening to rein in is that their lies and spin are unregulated, except by the likes of Paxman, Humphries and Snow. Failure in politics is not only tolerated it is practically encouraged. Remember that the next time they make their speeches about business and capitalist ethics. The biggest threat to the prosperity of all of us is the Euro and the EU. That was a creation of politicians who are not only tolerating failure, they are using our money to prop it up.