Let’s talk about Capitalism

By James Valentine

As a successful small business owner it’s rather nice to be held up as a positive example. Alex Smith and Luke Bozier apparently wish to get “more small business people into parliament and local councils, advocating loudly and proudly for their sector.” Well, Alex and Luke, I’ve just become a local councillor so I guess that makes me top of the pops? Parliament has so far eluded me but your piece is encouraging.

And how things have changed in the Labour Party. When I joined in the early 90s the first question was “are you a member of a union? And if not, why not?” I still remember the disdainful reaction when I gingerly answered awkward questions about how I earned my living – and had to “confess” to being self-employed.

I thought it was a first-class initiative to have a Q&A with a representative of the Federation of Small Businesses at conference last year. And we don’t always appreciate the improvements that Blair/Brown brought about. Their successive increases to the VAT registration threshold and the minimum turnover for producing audited accounts do not sound very glamorous but these are sorts of nuts and bolts changes that made a huge difference for small business under Labour.

However “enterprise” does not mean “Capitalism”. My business works in a highly competitive market but you don’t need to be a Lenin to observe that Capitalism has always tended to monopolistic practices and that’s where the problems arise. Look at the UK’s media ownership, for example. Or the defence industry, where monopoly MOD suppliers have, and always will, take the tax-payer for a ride if given the opportunity.

And without the rule of law, Capitalism is no different from organised crime. The “Arab Spring” referred to in the article is in part a reaction to outrageous corruption, which condemns millions to poverty and still bedevils development attempts in places like Afghanistan. In parts of Eastern Europe, Capitalism grows out of the barrel of a gun. Hence, the huge challenge of the world development, which brought many of us into the Labour Party in the first place, and the importance of the EU in extending civil rights.

Being enterprising means taking calculated risks and consistently getting them right. But the risk is the essence of it. For Capitalism to work, you have to allow failure. It’s the fear of skid row and losing the shirt off your back that means you work long hours to beat the competition. It doesn’t make sense to say that government should provide a “robust safety net” – if you need a safety net, you’re best working for someone else.

As several comments on Alex and Luke’s piece have stated, Capitalism as regards the banks was and still is dysfunctional because without the fear of failure then bankers will spend irresponsibly, safe in the knowledge that there will be a bail-out if things go wrong. Many of us are unconvinced that anything has really happened to change this. The recent economic cataclysm and the crisis with the banks is surely the defining political issue of our times.

Another huge issue which the government is already in crisis over (and which also perplexed Labour in office) is that of the public services – schools, hospitals and the rest. You can’t allow a hospital to fail, as you would a factory or supermarket, so if you bring in the private sector then it’s likely to be as a soft franchise or a cost-plus arrangement; in short, an opportunity for the business to rip off the taxpayer. If franchises get too big then the public, and particularly the vulnerable, suffer when they go under – witness the Southern Cross debacle.

You don’t need to be a Marx to conclude that this government is ideological in its approach to Capitalism – it’s promulgated as a kind of religion, regardless of whether it works or is appropriate in any particular situation. They’re the true heirs of John Major who forced through his crazy rail privatization. I have long suspected that, under pressure, they’ll revert to Thatcherite “no risk” share sales as a dole for better-off swing voters.

Labour has accepted Capitalism, and I agree with Alex and Luke that we are too mealy-mouthed about saying this. But Labour should also continue in its historic role of providing an intelligent critique of Capitalism, and making it work better, just as Ed Miliband, for example, has frequently observed.