Moral capitalism also needs to be practical capitalism

A hunger for a more moral, ethical capitalism is not exclusively the political preserve of the left. To lay claim to this increasingly contested territory, the left needs to focus less on rhetoric and more on delivery. 

Ethical capitalism may have returned to British political debate, but the demand for it is neither new nor, historically, a uniquely left-of-centre concern. More than a hundred years ago, Teddy Roosevelt was denouncing “malefactors of great wealth”, and in his 1902 State of the Union speech he told Congress that:

“Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions.” 

Forty years ago, Ted Health was denouncing Tiny Rowland’s company Lonrho and its attempts to minimise its tax liabilities as “the unpleasant and unacceptable face of capitalism”. You can draw a direct line from this moral rhetoric to the debates Ed Miliband feels he has led on the regulation of banks, the need to secure taxes, and the importance of tying rootless corporations to the societies they prosper in.

Moral capitalism has appealed to Ted’s and Ed’s through the ages, but doesn’t lead to the conclusion it is the preserve of the left alone. It is equally plausible that the right or centre’s belief in the power of the invisible hand does not blind them to the possibility that those participating in the market need to be watched over. Even the most hardened monetarist will agree with Adam Smith that “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.

If I am right that the urge for a more moral capitalism is more ‘pan-political’ than partisan, what does this mean for our current situation?

First, realise that while David Cameron may not be serious about delivering a more moral capitalism, he will certainly be able to sound serious about it. He will have a political and cultural heritage to draw on, even as he struggles to overcome his own career history, ideology and policy commitments.

Equally, if the Tories’ perpetual challenge is convincing people they mean what they say, the left must convince people that we can deliver what we wish for.

If the Tories have a tendency to sound like they won’t reform the abuses of the markets, then we sometimes sound like we’d like to do more, but don’t really know how. So we want to reform banking, but essentially we endorse the Vickers Report, and just want it implemented more quickly. We want a fairer market, but say we’ll deliver it by some a minor change to shareholder rights.

This implies we should mind the gap between rhetoric and effect. We sometimes talk about ending the neo-liberal consensus, but propose tighter regulation of train fares and putting a union rep on pay committees. These are worthy suggestions, but we should not bring them to market under grandiose language. They will not end neo-liberalism (whatever that is). As a former Procter and Gamble adman, I can tell you a washing powder that promises to remove ground in stains but only removes fresh gravy splashes is in big trouble.

We should also grasp that many people have good reasons to be sceptical about progressive schemes to reform capitalism. After all, a lot of apparently brilliant ideas don’t work that well in practice, or turn out to have unintended consequences; for every Glass-Steagall, there is a Smoot-Hawley, for every minimum wage, a selective employment tax.

This mixed record of reform places a big emphasis on proving that you know what you’re talking about. It puts a premium on thudding practicality (and perhaps putting businesswomen from the midlands above tweed-jacketed principals of Oxfordcolleges).

Second, we should think carefully about our choice to use the language of morality over, or entwined with, the plainer language of structural reform. There is a slight tendency to conflate a more ethical capitalism with a more even balance between different segments of the economy.

There is nothing more fundamentally moral about a manufacturer than a financier; regulation should be sector blind. There are moral steel manufacturers and immoral ones, moral accountants and immoral ones. Now, there are real, solid reasons to want a differently structuredUKeconomy. There’s a wider tax base, stronger regional development, the need to secure a better trade in goods, a desire to find long term competitive edges through innovation, and of course employment (though this latter can be exaggerated). All of these really matter, but they are not simply moral issues.

Thirdly, we should always remember what the purpose of a more moral economy is.

On the left, we seek an economy where the rewards for business success are shared broadly between shareholder, manager and worker, in the form of share-price, salary, wages and employment, and where this success is also used to fund social goods essential to the success of both individual companies (infrastructure, research, skills, and so on) and a society that supports such companies (health services, education, safety nets, police forces).

All of this is reliant, not on the immorality of capitalism, but on its morality:  while we should carefully regulate potential malefactors of great (and little) wealth, and while we should certainly not be subservient to them, we should also recognise that they are essential to us, and we need them, and we want them to succeed. It’s a lot easier to be ethical when you’re profitable.

None of this is to say that reforming capitalism is a pointless endeavour, or that the state should not play a major role in doing it. Rather, it is a central part of the mission of the left. I’d just suggest that to make it work, the left should approach the challenge somewhat differently.

The left should speak less of morality and more of practicality. Focus on the specifics, the credible, the nuts and bolts, rather than the grand sweep. The strongest charge against us is that we don’t know what we’re doing and are simply fiddling with a machine we barely comprehend. Win over business leaders, and engineers, and innovators who know whereof they speak before attempting to win over the public.

We should also remember why we seek to reform capitalism. Not because we want nicer capitalists, but because we want more jobs, higher wages, and less exposure to complete collapse. Everything we do should revolve around that mission. Every policy, every reform should be measured against those aims.

Finally, remember that a successfully reformed capitalism requires a successful capitalism. We know this, of course, but sometimes allow ourselves to sound as if we take it for granted, or that we’d rather not dirty ourselves with the business of success and profit.

Just occasionally, we might sound like we really believe that capitalism, watched over by the public interest, is a wonderful, successful thing.

We just know that it can be better yet.

This is an essay from the latest Fabian Society pamphlet “The Economic Alternative”, posted here as part of our “Economic Alternative Day”. You can download the pamphlet in full here.