In defence of the c-word: why capitalism is a force for good
As research shows falling public support for free enterprise, Business Secretary Sajid Javid says 'capitalist' should be a badge of honour.
Before I start today’s talk, I’d like to say a few words about the appalling terrorist acts that took place in Paris on Friday night.
I’m sure I speak for everyone here, when I say that our thoughts and prayers are with the victims, their families and the people of France.
The days and weeks to come will be difficult beyond measure.
But you will not face them alone.
We will stand with you.
Paris’s motto translates as “she is tossed by the waves but does not sink”.
And I think that’s an ideal we should all take to heart today.
Terrorists seek to instil in us a state of fear.
But we will not be afraid.
They seek to divide us.
But we will not be divided.
Our society may continue to be tossed by their waves of hatred and violence.
But we will not sink.
And now, if I may, I’ll turn to the subject of today’s talk.
I’m a proud capitalist.
That’s not something you’ll hear a lot of people saying in this country. Certainly not politicians.
But it’s true.
And why wouldn’t I be proud of it?
For hundreds of years, capitalism has been lifting people out of poverty.
It has been delivering international development, and raising living standards.
Over time it has been improved and refined, and helped to spread democracy around the world.
Without capitalism, the UK would not be the country that it is today.
Capitalism created the wealth that led to the NHS.
It allows us to pay for universal education.
It was the driving force behind 2 centuries of inventions and innovations.
Ideas that revolutionised the way we live, we work and we communicate.
Capitalism built houses and railways.
It feeds our people and it allows us to feed millions more overseas.
So it shouldn’t be controversial to call myself a fan.
Yet in 2015 capitalism is, for many, a dirty word.
In fact when I was planning this speech, some people said to me;
Look Sajid, you should avoid using the c-word.
Keep it to a minimum, stick to euphemisms like ‘free enterprise’, ‘open markets’ and ‘private business’.
It’s hardly surprising because, right now, capitalism is facing its gravest threat since the Cold War.
But that threat doesn’t come from an invading army or dictatorial leader.
It comes from a force that is far more powerful.
Public disillusionment.
As Tim Montgomerie’s excellent Legatum Institute study showed, millions of people have lost faith in capitalism across the world.
They argue that big business is inevitably corrupt.
That free enterprise always makes the rich richer at the expense of the poor.
That protectionism is preferable to free trade.
The financial crisis has left people weary and wary.
And in its wake we see populist politicians at home and abroad offering easy answers.
Answers that are direct challenge to capitalism itself.
Now this is nothing new.
There have always been oddballs and loners sitting on the sidelines and demanding a return to agrarianism or something similar.
They’ve been there for as long as the free market has been the dominant system.
But today we see such views seeping into the mainstream for the first time in decades.
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Capitalism failed to cover itself in glory over the past decade.
And now public opinion is turning against it in a big way.
This matters, because no system can survive without the support from the people.
And make no mistake, capitalism is at its heart just an economic system.
It’s a construct. It’s something that has been created and refined by human hand.
It’s not a dog-eat-dog, laissez-faire free-for-all – it’s a system with rules.
It is not the natural order of things and, left unsupported, it could quickly be lost simply through neglect.
We have to consciously choose to embrace it, choose to continue its legacy.
President Reagan was talking about democracy when he said that that “freedom is never more than 1 generation away from extinction”.
But his idea – that freedom is not passed on but must be fought for, must be protected and must be defended – applies equally to the free market.
We neglect it at our peril.
And if we fail to support it, it could still crumble in the face of countless tiny attacks.
Or, as the second President Bush put it in slightly more succinct terms: “this sucker could go down”.
So why is it worth defending?
Why, if the tide is turning and opinion is shifting, should we not just throw in the towel and try something different?
Well, I’ll tell you why.
Because capitalism is a force for good.
Because, to paraphrase Winston Churchill, it’s not a dangerous tiger that needs to be shot, or a cow that can be milked.
It’s a healthy horse that pulls us all forward.
Just look at what it has delivered so far.
In the 6,000 years to 1750, living standards in the developed world doubled.
But since the industrial revolution, that doubling has occurred roughly every 50 years.
Each generation has been a third better off than its predecessor.
Since the 1970s, the proportion of the world population living on a dollar a day has, adjusting for inflation, fallen by 80%.
That’s the greatest improvement in living standards ever achieved in the whole of human history.
It’s made an unimaginably huge difference in the lives of literally billions of people. But it wasn’t delivered by a UN initiative or by the World Bank.
It didn’t happen because of a foreign aid budget, or because governments willed it to be so.
It happened because of the spread of capitalism and of free trade.
Just look at China.
Forced collectivisation killed millions of people and left 64% of the population in poverty.
It was Deng Xiaoping who realised that something had to change.
Asked why he was moving China closer towards capitalism, he said that “It doesn’t matter if a cat is black or white, so long as it catches mice.”
And, sure enough, when the country finally began to embrace capitalism, the poverty rate swiftly fell to around 8%.
Legatum’s annual Prosperity Index repeatedly shows that the most prosperous nations on earth are those that are economically free.
Meanwhile, one of the biggest fallers in this year’s ranking was Venezuela.
It’s providing a very real case study, I believe, of Lady Thatcher’s maxim that all socialist governments eventually run out of other people’s money.
And it’s the people of Venezuela who are paying as a result.
But the benefits of international capitalism aren’t solely economic.
As Nye Bevan wrote, “freedom is the by-product of economic surplus”.
As capitalism has spread around the world, it has taken liberal democracy with it.
The 2 go hand in hand.
The values and institutions you need to effectively run a capitalist market are the same one that are required for a democracy.
Put simply, both rely on giving people the freedom to choose.
To choose who governs them.
To choose what they want to buy.
In a capitalist society you can choose your career, choose your direction.
Capitalism gives you the opportunity to break out of the confines of where you came from.
Capitalism is colour-blind.
It doesn’t care what you look like, where your parents come from or whether you have a funny-sounding name.
It recognises ability, not connections.
It rewards people who do well regardless of the colour of their skin.
And if you don’t like capitalism?
If you want to drop out of the system and you want to live in the woods eating berries?
Well you can choose to do that too.
In a state-planned economy the opposite is true.
It relies on everyone being told what to do and when to do it.
On being assigned a role and then being expected to follow it.
A centrally-run, government-planned economy simply doesn’t work if people are allowed to choose what they want to do.
The Berlin Wall was not built to stop desperate West Germans fleeing to the DDR.
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So there’s no doubt whatsoever that capitalism has been and continues to be a massive boon for international development, both economic and political.
But that doesn’t mean that it’s only of use to developing countries or those emerging from the shadow of totalitarianism.
Here at home, I often hear critics of the government complaining that our long-term economic plan is driven by ideology.
And you know what?
They’re absolutely right.
It’s driven by an ideology that says a strong, stable, secure economy is what Britain needs in order to thrive.
That says capitalist democracy allows us to pay for schools and hospitals and defence.
That recognises only capitalism provides the means to tackle those five giants of squalor, ignorance, want, idleness, and disease.
Thanks to capitalism nearly every home has access to labour-saving devices from vacuum cleaners to washing machines.
We can buy an abundance of fresh fruit and vegetables all year round. We can take holidays, we can buy TVs, we can work flexibly.
We can flick a switch and not be worried about whether the lights will come on.
Our sporting success, our world-class health service, our incredible creative industries, our cultural pioneers.
Almost everything we take for granted in modern Britain is only there because of capitalism.
The last time this country experimented with state planning and nationalisation, we ended up with a stagnant economy.
We had runaway inflation.
We had rubbish piled up in the streets.
And the people who suffered most then weren’t the wealthiest in society.
They weren’t the bankers and they weren’t the super-rich.
The people who suffered most were the ordinary men and women.
People who just wanted to work hard and provide for their families.
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Right now we live in a country with record employment, with more private businesses than ever before.
We’re a prosperous nation, a thriving nation, the kind of nation I came into politics to help create and protect.
So yes, my policies are driven by capitalist ideology.
An ideology that has made Britain and the world freer, happier and more prosperous.
An ideology that has given us the means to enjoy our lives and the time with which to do so.
An ideology that I will fight tooth and nail to defend.
But my passion for capitalism doesn’t mean I’m blind to the challenges that it presents.
Perhaps the biggest is that of inequality.
The gap between the haves and the have-nots.
Of course, that gap is relative.
Thanks to 2 centuries of capitalism, anyone in Britain earning an average salary is, in global terms, comfortably among “the One Per Cent”.
Our standard of living is considerably higher than it used to be.
Yet people are still understandably aggrieved when they see a tiny handful of individuals doing exceptionally well.
There’s also the risk of exploitation.
Some employers choose to maximise profits by paying low wages.
They cut corners on workplace safety, and they commit irreversible environmental damage.
And if the minority refuse to play by the rules, of course the majority can suffer.
Whether it’s dumping steel on the global markets, fiddling emissions tests on new cars, or conspiring behind the scenes to fix Libor rates, a few people with bad intentions can make themselves wealthy at the expense of a great many others.
These problems easily spill over into a criticism of capitalism itself.
As Tim’s report shows, despite everything it has delivered, most Britons do not think of capitalism as a force for good.
But inequality is not a fault with capitalism itself.
It’s a limitation of it, something it cannot fix on its own.
Likewise, exploitation and illegality are not flaws in the fabric of the system.
They are simply flaws in human nature.
Under any system there will always be people who refuse to follow the rules, who take advantage of others to enrich themselves.
Despite what the propaganda says, there are thieves in socialist societies too.
Adherents of Marx think that all of the answers are contained in the Communist Manifesto.
But capitalists are more pragmatic.
We recognise that there’s more to life than the Road to Serfdom or the Wealth of Nations.
That’s why Adam Smith started off by writing the ‘Theory of Moral Sentiments’!
None of us should be afraid to say that capitalism is a work in progress.
That it has been refined and improved over many years, and that the process of perfection still goes on.
State-planned economies rely on doing the same thing over and over again and expecting something other than failure.
Meanwhile, capitalist societies recognise when something isn’t working and they take action to address it.
And that’s where the government has a role to play.
In recent years it’s become fashionable to bash government as an institution, to say it’s inherently a bad thing.
In some circles you’ll find people who think the state has absolutely no role to play in business at all.
I’m not one of those people.
Government has always had an absolutely crucial role to play in improving and enhancing capitalism.
Without government intervention, factories could employ child labour and force workers to endure dangerous conditions.
Without government intervention, it would be perfectly legal to pay women less than men, or fire them for getting pregnant.
Without government intervention, a business owner would be allowed to refuse me service because of the colour of my skin – as some did to my dad.
And such interventions aren’t just battles from the past.
I’m proud to be part of a government that’s introducing the National Living Wage and the Apprenticeship Levy, government interventions in the free market that will help make capitalism work better.
I’m proud to be passing the Enterprise Bill, protecting small business owners against late payments and making sure that everyone plays the by rules.
I’m proud to be a Business Secretary who is relentlessly pro-business, yet unafraid to take action when things aren’t working.
Continuing to improve the system is a major part of my job.
And over the next few weeks and months I’ll be talking a little more about what government and business need to do to in order to make that happen.
To tackle abuses of the system.
To make sure nobody is left behind by progress.
And to help restore public confidence in capitalism.
Now I started this morning by talking about how ‘capitalism’ has become something of a swear word.
And in many ways, as supporters of capitalism, we have only ourselves to blame.
Because over the years we’ve allowed the debate to be framed in terms of left and right.
We’ve allowed capitalism to be defined as an immoral, laissez faire free-for-all.
A system that doesn’t just tolerate exploitation, but actively encourages it.
But things really aren’t that black and white.
The Rowntree and Cadbury families were capitalists who built vast business empires by selling their goods.
But they also invested huge amounts in the welfare of their workforce and wider society.
George Cadbury even used his fortune to buy a newspaper so that he could use it to campaign against sweatshop labour.
A century later, the world’s most successful capitalist is Bill Gates.
He’s giving away tens of billions of pounds to improve healthcare in developing nations.
One survey recently named him the most popular man in the world.
Being a capitalist does not make you a bad person.
It is not a synonym for evil.
I’m a capitalist, but I also believe in equality, that people shouldn’t be allowed to discriminate.
I’m a capitalist, but I don’t believe we should pursue profit at all costs and destroy the planet in the process.
I’m a capitalist, but I don’t believe in exploiting workers in the UK or anywhere else.
Critics of capitalism do not have a monopoly on conscience and compassion.
And on the other side of the coin, capitalists are not alone in thinking that the state should allow people to do well for themselves.
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No less a figure than William Beveridge said that:
The State … in establishing a national minimum … should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family.
So from whichever angle you look at it, capitalism is a force for good.
The challenge we face is to make that case in a compelling and convincing manner.
We have to celebrate and highlight what it does well, and address problems when things go wrong.
We have to be unashamed to say that we support capitalism, but unafraid to admit that it can always be improved.
Above all we have to demonstrate, through words and actions, that capitalism is not an ugly necessity, something rotten that we simply have to tolerate.
Capitalism is a wonderful, powerful thing.
The single greatest tool we have to tackle poverty.
To raise living standards.
And to boost international development.
It’s the best economic system anyone has ever devised.
And it’s crucial that we defend it.
Because capitalism is not perfect, but it can be perfected.
And it falls to its supporters to do just that.