Can capitalism reform itself before Corbyn plants the red flag on the Bank of England?
What has gone wrong with capitalism? By the close of the twentieth century, a century dominated by the global confrontation between communist and capitalist powers, that struggle had ended in the total victory and vindication of free-market principles. Marxism had collapsed, its economic illiteracy exposed empirically by the poverty it sowed throughout its terror-controlled fiefdoms. Dialectical materialism was incapable of delivering material prosperity.
It would be wrong to represent the Cold War as a conflict between Communism and Capitalism, as though free markets were, like Marxism, an ideology. The fact that capital acquired the “-ism” suffix should not delude us into regarding it as an ideology, alongside communism, fascism, conservatism, etc. Capitalism is not an ideology but a mechanism for wealth creation, pure and simple. It can exist under a variety of non-totalitarian political systems. The Cold War was a contest between Communism and Democracy.
Marxism, in contrast to capitalism, was an ideology that, as it lost practical credibility, relied increasingly on the quasi-religious fervour it inspired in its more fanatical followers. It is now an empirically discredited ideology or, in other words, a superstition. Its failure has partially been masked, however, by the extent to which it gained control of many of the commanding heights in Western society.
While Margaret Thatcher was promoting free-market principles in Britain, the shelves of university libraries groaned under the weight of Marxist claptrap housed there. University academics sulked in their tents while the world around them was transformed: it was independent think tanks that drove the Thatcher revolution. The volumes of Marxist apologetics still clutter universities while academics, now claiming the weasel identity of “Marxians”, continue to minister, mainly in a cultural context, to a druidic cult the world has left behind.
Today, however, Marxism is suddenly chic and Jeremy Corbyn is its prophet. Alarmed commentators are warning of the dangers of a Corbyn government. They are behind the times: there is grave peril to Britain’s interests even from a Corbyn opposition. Financial institutions are debating whether to keep their operations based in London or up sticks in fear of Brexit. In many cases the decision must be finely balanced and vulnerable to pressure from any unwelcome development.
Then along comes Jeremy Corbyn, Leader of Her Majesty’s Loyal Opposition and level-pegging in opinion polls with Theresa May’s government, and delivers the most menacing anti-capitalist rant since Lenin addressed his fans at the Finland Station. To undecided financial institutions, that sends the message that London is an inhospitable venue for reasons that go beyond Brexit. Corbyn is repelling financial services from London with his vision of converting Britain into New Venezuela. He could crash and burn at the next general election and still have inflicted severe damage on Britain without ever becoming prime minister.
The instinct of informed commentators is to dismiss Corbyn’s attacks on free markets and free press as the ravings of an economic illiterate whose prejudices are the consequence of watching too many grainy Eisenstein films in polytechnic lecture theatres, his fiscal skills honed on an abacus during seminars at the Diane Abbott School of Economics. That is an accurate enough personal assessment, but it dangerously ignores two factors: some of Corbyn’s accusations are true and they carry an enormous resonance with the mass of the British public.
Consider what he said: “We will take decisive action to make finance the servant of industry not the masters of us all.” He added: “We need a fundamental rethink of whom finance should serve and how it should be regulated.” That will have struck a strong chord across Britain with the many victims of banks’ cynical dealings. It is not just snowflakes punching the air in student unions who are enthused by this, but also their parents and grandparents.
After the shock of 2008 many of us said capitalism urgently needed to reform itself, to re-forge its partnership with virtue, a symbiosis prescribed by Adam Smith. Smith wrote two best-sellers: not only The Wealth of Nations, but also The Theory of Moral Sentiments, the precepts of the two books being regarded by Smith as complementary. Contemporary capitalism has bastardised the principles set out in the former work and ignored the latter.
Capitalism should have been radically reformed in 2009 and the years following. Instead, the cracks were papered over, leaving the whole structure vulnerable to attack by the Corbynistas. Many banks and other corporations far beyond the financial services industry hid behind PC virtue signalling initiatives; some of their exaggerated “mission statements” have an almost cultish ring to them. This is a cosmetic exercise. It is no consolation to customers that the institution that is bleeding them white has 30 per cent female board membership. The reform that was wanted was in the organization’s financial ethics.
Even the virtue signalling reflects the arrogance and excessive outreach of corporations, epitomised by the assembled plutocracy at Davos aspiring to remould the world according to its own prejudices. It is time for the corporate world to get out of the business of social engineering, of which George Soros is the most egregious example, and put its own house in order.
If the financial services industry had the slightest self-awareness it would recognize that massive bankers’ bonuses are a provocation in an Internet-linked world whose denizens have, from birth, been brainwashed with witless notions of “equality”. Tall poppy syndrome rules Twitter. Every tabloid report of a banker’s inflated bonus or pension is worth tens of thousands of votes to Jeremy Corbyn. The tired old, supercilious justifications are fatuous: it is heresy to interfere with market forces (nonsense, the market doesn’t award bonuses, self-interested remuneration committees do); talent will go elsewhere (perhaps, until elsewhere catches up with a MeToo wave of remuneration realism).
Politically, the danger comes less from investment banks than the high street, since that is the sector that impacts directly on voters. Since the 1970s banks have perfected the art of lending not quite enough to SMEs, leaving them under-capitalized and doomed to failure, at which point the bank, after years of high interest returns, pulls the plug. There is a considerable constituency of families, ex-employees, friends, etc of victims of the banks, eager to wreak revenge. The list of delinquencies is endless: irresponsible mortgage sales, PPI, sharp-practice bank charges, poor customer services – it all adds up, fuelling public hatred of banks. Regulation? FSA, FCA, who is impressed?
There is a resemblance to the immigration crisis, which tipped the balance for Brexit. Hatred of the financial sector could swing an election for Corbyn. He has found a potentially winning theme. He has turned a nakedly Marxist platform based on old Trotskyite caricatures of fat men with top hats and cigars into a potential 21st-century election winner.
Capitalism is on the ropes and the count is far advanced. Can it revert to the principles of Adam Smith and reinvent itself as a vehicle of prosperity for all? Or is the time too short and the system too corrupt? And what part, other than the fatuous imposition of quotas on boardrooms, will the government play in the regeneration and popularisation of capitalism? With Corbyn at the gates, we shall not have long to wait to find out.