35 Comments

• Olly Neville 19th Jan '12 - 4:36pm

  Do you realise the example you gave, of the Wright Brothers achieving flight, is a great example of the Free Market providing a solution to a problem, even while Corporatist interests failed

  Do you really understand what Capitalism is, I think you are confusing it with Corporatism which is so far removed from Capitalism it hurts

  We have Corporatism, not Capitalism, by all means attack Corporatism, but don’t blame what we don’t have for out problems

• Andrew Emmerson 19th Jan '12 - 4:42pm

  Yes really! Liberalism is capitalism, it encourages good capitalism.

  Equating Americas health care system with capitalism is simply daft beyond belief, it is not capitalism that created it, it is huge vested interests that lack competition and is encouraged by a corrupt political system.

  Secondly your example is flawed, especially when you use that Clegg quote. Nick was arguing that capitalism is not seeing the wealth in the hands of the few, it is seeing the wealth in the hands of the many. So your example proves nicks point, that capital in the hands of the wright brothers allowed them to develop, that a better system is where the wealth is shared more equally.

  Capitalism is that system. Capitalism is competition. It’s not our fault we haven’t had it yet, we’ve had corporatism and crony capitalism. We as liberals must encourage open markets and open opportunities.

• Mike Bird 19th Jan '12 - 4:47pm

  “The capitalism that exploited the poor so much” – the poor by what standard? The worst of working people in the UK when Labour came to power were well within the highest percentiles of income in the world. And they still are. They’re also hugely better off than they were in the past. I only have to earn £14,000 to be among the richest 10% of people in the world. Even on £7,000, I’m richer than 87% of people. ( http://www.globalrichlist.com/ )

  http://www.telegraph.co.uk/news/uknews/1576933/Britons-spend-one-fifth-of-income-on-homes.html

  This is the difficulty with the word ‘capitalism’ if you don’t define it. You’re clearly using it pretty much interchangeably with exploitation. That’s not how I think of it. If what you want is the ability for people to exchange and interact voluntarily, creating a market to determine what people do and do not desire, to drive down prices by competition and form an organic system which creates real prices in a superior way to government (and is historically the only system with any real track record of doing so) then that’s my version of capitalism. What’s the better evidence-based system for unlocking potential, innovation, creativity?

  We shouldn’t be naive believers, I’m not a purist. Market solutions are not a panacea for absolutely everything. But the argument is now between actual capitalism, and capitalism (with fiddled elements). What’s the alternative?

• Andrew Tennant 19th Jan '12 - 5:00pm

  Yes, really.

  If capitalism isn’t required to build a healthcare system then there’s nothing stopping those American citizens who reject capitalism from running a non-capitalist healthcare system for everyone in parallel to that which exists already.

  When you’ve got your non-capitalist parallel state educating, feeding, clothing and caring for over 50% of the world’s population – then we can talk.

• mike cobley 19th Jan '12 - 5:01pm

  Ah, how predictable, Liberals confused about how to deal with capitalism. Well, its like this – in a modern democracy markets have a role to play, just as public/state provision of basic services has a role to play. Of course, the free market groupies will earnestly assure everyone that markets are the answer to everything, to which we should reply, tell that to workers in China, the Phillipines and elsewhere who are groaning under a grotesque, Dickensian oppression.

  Dont forget, either, that those serf-like workers are the kind of workers that capitalists love, and which we would be more like.

• Steve C 19th Jan '12 - 5:17pm

  I’m struggling to know where to begin in responding to this – it seems so far removed from liberalism, and so mistaken about the whole purpose and conditions of free-market capitalism that I’m at a bit of a loss. That’s not going to stop me having a quick stab at a critique (in order of points made) though.

  “The capitalism that so often exploited the poor to fill the pockets of the elite? The capitalism that exploited the poor so much that Labour had to introduce a minimum wage in order to help the most vulnerable and needy in society? The capitalism that created a healthcare system which leaves so many Americans without health insurance because they can’t afford it?”

  1. Capitalism did none of these things – people did these things – concepts have no agency.
  2. What do you mean by exploitation and capitalism? I think you need to do a lot more to demonstrate that capitalism necessarily results in the negative consequences you describe, that it’s worse than any potential alternatives, and that it, and that it’s not not some other factor that has caused the negative consequences (such as entrenched disparities in power resulting from injustice, or government interference in the market, or a failure to ensure equality of opportunity as examples). You certainly don’t seem to be describing the kind of free-market capitalism that liberalism endorses.

  “Mainstream opinion says you need three things in order to be successful in a capitalist system: large sums of money, the greatest minds in a particular field and a market to sell into.”

  It does? Where is the evidence? How are you measuring success in a capitalist system? You seem to be measuring it in terms of wealth, rather than say freedom (which seems to be the value giving the idea it’s normative force).

  “Let me give you an example…”

  That’s an anecdote, not evidence.

  “Look around the world today, what is everyone looking for today? Is it to change society, to make society better or are they in pursuit of the fame and fortune?”

  Here’s the thing: everybody is looking for something different, and that is the essential point of the neutral liberal state and the power of the market – it allows people with competing conceptions of the good and radically different comprehensive doctrines to get along without tyrannical coercion from government.

  “I think when people talk about the good qualities of capitalism like innovation and experimentation; they aren’t talking about capitalism but are talking about a political system that allows human creativity to flourish. A political system that oppresses, a society that oppresses and sometimes people’s own fears stop creativity, stops experimentation, stops innovation.”

  I don’t think you’ve even come close to demonstrating that capitalism is a political system that results in these negative consequences. The closest it gets is ‘some forms of capitalism, and in some conditions, result in bad consequences of the sort described’. That’s not an argument against the principles of all forms of capitalism.

  “Human capital is why an open liberal society is so important because it allows people to be creative, free from excessive state interference, free from rigid societal structures, free to be creative, innovative and successful.”

  Ah – so what you are looking for is a liberal state and a free market? Er….

• Malcolm Todd 19th Jan '12 - 5:32pm

  “What did the Wright brothers have? Nothing, they had no capital, they used the proceeds from their shop to fund their dream. ”

  Er — the proceeds from their shop? Their shop? Was it a socialist shop? A communitarian shop? Is capital only capital if you have more than a certain amount of it?

  I think your story just proves that rich people don’t always win. Which is good, no?

• Mike Bird 19th Jan '12 - 5:33pm

  @ Mike Cobley:

  Here’s a graph of Chinese GDP per capita: http://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_pcap_cd&idim=country:CHN&dl=en&hl=en&q=chinese+gdp+per+capita

• Simon McGrath 19th Jan '12 - 5:39pm

  What a very confused piece. Are there downsides to capitalism – of course. That’s why we have controls on what firms can do.
  don’t think I have ever heard anyone suggest this:”Mainstream opinion says you need three things in order to be successful in a capitalist system: large sums of money, the greatest minds in a particular field and a market to sell into.” Innumerable examples show that is not the case – Apple for example.
  In the last 20 years capitalism has taken hundereds of millions of people out of extreme poverty in India and China.

  The really great thing about capitalism is that it produces so much that we can tax some of the output and use it to provide benefits like the NHS, welfare state etc.

• Simon McGrath 19th Jan '12 - 5:41pm

  From wikipedia on the Wright brothers:
  “Capitalizing on the national bicycle craze (spurred by the invention of the safety bicycle and its substantial advantages over the penny farthing design), the brothers opened a repair and sales shop in 1892 (the Wright Cycle Exchange, later the Wright Cycle Company) and began manufacturing their own brand[19] in 1896. They used this endeavor to fund their growing interest in flight.”
  Sounds like capitalism to me.

• Cllr Steve Bradley 19th Jan '12 - 5:44pm

  Is it ever possible to have capitalism in any ‘pure’ form ? i.e. just the good bits, without the bad bits and the negative consequences ?

  I fear not. just like many thought socialism/communism looked good on paper, but was always executed atrociously. Capitalism has an in-built homing signal that will always see it eventually strive for social ills like monopoly, haves and have-nots etc. It’s in the system’s DNA.

  Capitalism as we cuirrently understand it to be – i.e. its neo-liberal form – isn’t working, and is a car crash. It fetishes ‘the market’ above all else, rather than viewing it as just a tool to achieve broader social aims ; it only places value upon things that contribute to GDP (war is therefore good, helping a neighbour out bad, as only one contributes directly to economic activity) ; it operates in a moral, ethical and environmental vacuum ; and it cares not for the conssequences upon communtiies and individuals of its market-led conclusions. As Liberalism is about empowering individuals and giving them the ‘agency’ to control their own lives in a meaningful way, neo-liberal capitalism as we know it is the complete opposite. It reduces individuals to miniscule cogs in a global economic machine, and it does the same with entire communities. Other economic models such as mutualism etc – they are much more empowering and in tune with liberal principles and ideology than neo-liberal capitalism is.

  We need to stop trying to mend an inherently flawed system and start focusing on what will take its place. A new paradigm of economic activity, trade and measurement in which individuals feel more empowered and less isolated, and where the important things in life are valued above GDP and the ‘market’ as sacrosanct.

• John Carlisle 19th Jan '12 - 5:45pm

  Nicola,
  I think you have made some trenchant points – as have others, except Andrew on USA Healthcare. I am afraid it is capitalism thinking that gave the USA the healthcare it has, kept alive by the capitalist companies like GM etc., who paid the wealth of healthcare insurance for the employees and retirees, which eventually nearly killed the company. The question is what or who killed off the mutuals and fraternal societies that were set up to look after the sick and indigent, especially in the USA, e.g.the Odd Fellows, which is only a rump now.
  What we need to do is see work and production through a different lens. The way that Jamshed Tata saw it in Manchester in the second half of the 19th century. The very thing that horrified Engels by its dreadful impact on the workers Tata took back in a redeemed form to India.
  If you want to see so-called proper capitalism at work go to Jamshedpur, the city created by Tata to create wealth and jobs for India – not for him.

• Simon Shaw 19th Jan '12 - 5:49pm

  Back in the early 20th century everybody was trying to create the first controlled powered flight, one of them was Samuel Pierpont Langley. He was given $50,000 to figure out how to achieve a controlled flying machine, money was no object. He was well connected and hired the best minds of the day. The market conditions were perfect, the New York Times followed him around. Everyone was rooting for him to succeed.

  Yet, we’ve not heard of Samuel Pierpont Langley. Why? Because the Wright brothers got there first. What did the Wright brothers have? Nothing, they had no capital, they used the proceeds from their shop to fund their dream. The proceeds from the shop was peanuts compared to the capital that Pierpont Langley had access to. No one on the team had a college education, not even the Wright brothers and nobody followed them around.

  How did they do it? They believed in what they were doing. They believed if they could work out how to do this flying thing, they could change the world. Everyone who worked for them, believed in this too so they gave their blood, sweat and tears.

  Samuel Pierpont Langley was doing it for the fame and the fortune. He quit when he found out the Wright brothers had achieved what he was trying to achieve.

  I hadn’t heard that story before, Nicola, but I’m not sure whether it doesn’t make the reverse of the argument you make.

  The Wright brothers were capitalists (“they used the proceeds from their shop to fund their dream”), it was merely that their capital was a lot less than Langley.

  Isn’t that a cause for rejoicing? A small entrepreneur (or a pair of them), through nous, determination, ingenuity, bravery or whatever, overcame a well-funded competitor.

  If it was only the best-funded who succeeded then I, too, would share your concerns, Nicola. But that is not how it works – thank goodness.

• Andrew Tennant 19th Jan '12 - 6:05pm

  Amusingly it seems that Langley’s funding came from the state (specifically the US War Department).

  Let’s call that Private Enterprise 1 – State Manipulation 0

• Liberal Eye 19th Jan '12 - 6:11pm

  Steve Bradly put it best. What passes for capitalism has gone badly off the rails – an outcomethat is the result of thinking as badly flawing in its own way as communism.

• Graeme Cowie 19th Jan '12 - 6:12pm

  I’d go further than Clegg. I’d go as far as to say that at just about every juncture where capitalism is supposed to have “failed” it’s been where a special interest group has sought to undermine its ethos of competition, private property and responsibility for ones own actions.

  Whether it’s bankers getting politicians to rig the system so they become perceived as “too big to fail” and get bailed out, or state protected monopolies (whether public or private) from railway lines to health, to the supply of controlled substances. Where government’s aim becomes about controlling the economy it ceases to have the character of a capitalist system, but becomes a perverse croney corporatism which makes for the worst of both worlds; the lack of productivity of a socialised system combined with the inherently unequal outcomes of a system of trading and capital produces.

  Indeed the example you cite in your piece simply reinforces my view that capitalism works. Just “handing over” a large sum of money to someone and telling them to pursue a vanity project isn’t analogous to the merits of capitalism at all. That is comparable, if anything, to a state hand-out or a state-managed economy. The Wright brothers, on the other hand, did have capital. They applied their labour to accumulate resources, to run a business, for a profit, reinvested into a research project in which they applied their talents and their materials, with a little bit of luck, to achieve something that started something that has immeasurably improved the lives of humanity. That’s capitalism in action. They are a success story!

  When Nick Clegg says the problem is that too few people have too much capital he’s absolutely right. For too many, their labour is only sufficient to live, rather than to live well. What he’s actually saying is that capitalism works best when you remove the obstacles to labour value being properly reflected in the relative material benefit that is distributed among workers. When workers are stakeholders or shareholders, the success of a company being connected to the quality and quantity of production, becomes more intimately connected to the interests of the workforce.

  As a liberal I find it incredibly frustrating when people conflate capitalism with corporatist models. The solution to our problems is not to baulk away from the system that allows for a dynamic exchange and distribution of resources according to the demand brought about by human need and desire, but to fight for it with every bone in our body. We need more capitalism, not less.

• Simon McGrath 19th Jan '12 - 8:23pm

  I am looking forward to hearing Nicola’s reply to Andrew’s point (confirmed by wikipedia) that the failure in her example was funded with public money.

• Geoffrey Payne 19th Jan '12 - 8:37pm

  I do not think that capitalism equals liberalism. There are many instances where it is illiberal. Most companies are authoritarian in the way they run.
  I agree with Nick Clegg that worker cooperatives and mutuals offer a better organised form of capitalism that is more liberal. But in a free market, the John Lewis partnership is the exception rather than the rule. If you want more cooperatives and mutuals then the government has to intervene in some way to encourage it.
  When it comes to competition, this turns out to be a double edge sword. Yes there are times you walk in a shop and if you have the money then you have a great choice of what you can buy. However even in this idealised scenario, what you do not see is the worker exploitation or the environmental damage.
  At it’s best the Liberal Democrats and previous the Liberal party offer a non-socialist critique of free market capitalism. We can rely on the Tories to be the cheerleaders of free markets, the Liberal Democrats historically were more nuanced in there evaluation. We did after all support the renationalisation of the railways for a while. Whilst that might be unaffordable now, it is true that in private hands our railway system is the most expensive in Europe, and this at a time when we need to encourage more people out of their cars in order to reduce global warming.
  Even the John Lewis Partnership – and I make a special point of shopping there myself – even they sell patio heaters and lobbied against the congestion charge in London. Even they put profits before the wider public interest.
  The truth of the matter is that we have never found a perfect way of organising our society and we probably never will. Every system is flawed and it will be left to politicians whether at a local, national or European level to minimise those flaws as much as possible,

• Graeme Cowie 19th Jan '12 - 9:38pm

  I don’t think the Tories are especially good champions of free markets at all.

• Mark Inskip 19th Jan '12 - 9:48pm

  @Andrew Tennant
  Yes you’re correct, Langley’s $50,000 came from the War Dept. i.e. public money

  The Wright Bros. opened a bicycle repair and sales shop in 1892 (the Wright Cycle Exchange, later the Wright Cycle Company) and began manufacturing their own bicycles in 1896. The proceeds from their shop funded their flying works.

  Pretty clear that the Wright Bros. were successful capitalists.

• tim leunig 19th Jan '12 - 10:15pm

  What a good set of comments! As people have said, the Wright Brothers example could serve as a textbook case of capitalist entrepreneurial risk taking!

• Hywel 19th Jan '12 - 11:03pm

  “Mainstream opinion says you need three things in order to be successful in a capitalist system: large sums of money, the greatest minds in a particular field and a market to sell into.”

  How much money did Apple and Microsoft have when they set up? Not sure you can even say Bill Gates was the greatest mind in his field either

• AndrewR 19th Jan '12 - 11:55pm

  It’s easy to forget after 30 years of neo-liberal brainwashing that nearly all the truly transformative technologies of the last hundred years have sprung from government funded research rather than the private sector and sobering to recognise that this largely because war is the great engine of innovation.

• Cllr Steve Bradley 20th Jan '12 - 1:08am

  War, followed by pornography, followed by gambling. The unholy trinity behind the largest percentage of much of our innovation over the last few decades….! :o)

  Ironically Labour was rather good at promoting all three….

• John Carlisle 20th Jan '12 - 7:07am

  AndrewR and Cllr Steve – Government funded technology: if you look at what truly changed our everyday lives you would think again. The micro-chip, the mobile phone, the car, railways (neither Stephenson nor Brunel were a govt employee), the tv, Dyson, etc. etc. Not all good, perhaps; but none government.

• AndrewR 20th Jan '12 - 10:15am

  John Carlisle
  Given the internet grew out the US military and government funded science shouldn’t you have sent your list of private sector innovations to LDV by letter? I’ll give you the car and the microchip but Dyson? Really? WW II alone gave us computing, nuclear technology, the jet engine and the origins of the rocket technology that sent us to the moon.

• Malcolm Todd 20th Jan '12 - 11:02am

  “It’s easy to forget after 30 years of neo-liberal brainwashing that nearly all the truly transformative technologies of the last hundred years have sprung from government funded research rather than the private sector and sobering to recognise that this largely because war is the great engine of innovation.”

  And utterly irrelevant to the question of how we should organise the economy, society and scientific research in peacetime. The “free market” may have some appalling effects, but if the state only does better in times of all-out war it doesn’t say much for “government-funded research” being a better bet.

• Tony Dawson 20th Jan '12 - 11:22am

  Perhaps capitalism has been successful in the same way as UK Lib Dems in government have been, politically?

• Graeme Cowie 20th Jan '12 - 1:22pm

  And utterly irrelevant to the question of how we should organise the economy, society and scientific research in peacetime. The “free market” may have some appalling effects, but if the state only does better in times of all-out war it doesn’t say much for “government-funded research” being a better bet.

  Perhaps we should drop a few biological weapons on Syria. We might get a flu vaccine out of the researchers a few years after we’re done. Good stuff…

• Geoffrey Payne 20th Jan '12 - 1:28pm

  It was the state – not private enterprise – that invented the internet. Something I find ironic as the internet seems to be the only place you can find libertarians.

• Andrew Tennant 20th Jan '12 - 1:55pm

  The state did not invent the Internet; researchers at private universities invented a internetwork communication protocol, the state provided some capital to test it, then commercial providers took it to the masses, and private individuals created to content (along with web browsers, e-mail and the communications infrastructure!). Left in the hands of the state the Internet would be a few universities and defence computers sending messages to one another.

• AndrewR 20th Jan '12 - 1:55pm

  Malcolm Todd
  I don’t actually think it’s a question of whether the state or private sector is the “best”. There is a strong co-dependency which is often passed over in discussions like this. A good example is the internet which is only possible because it is founded on open protocols and standards. The ability of companies like google and amazon to innovate on top of this platform required public bodies to create it in the first place. The internet itself is not something that could have developed within a purely capitalist society. Chris Huhne made a similar point recently about the role of regulation and standardisation to create and stimulate markets. The point about how much technology ultimately owes it’s origin to military spend (which as we know consumes a fantastic amount of money in peacetime as well as war) is simply to register a melancholy fact.

• Cllr Steve Bradley 20th Jan '12 - 3:00pm

  John Carlisle – I wasn’t claiming that government-funded technology drives innovation. I merely listed the 3 main industries that HAVE driven much of it for the last number of decades. I didn’t clarify or refer to the extent to which they are government-funded or not.

  Though it is interesting that you seem to extract from what I wrote that there is substantial government funded porn and gambling* ;o (*I’m not counting Tessa Jowel’s parliamentary expenses and Labour’s economic policy of the last decade in that btw)….

• Richard Swales 21st Jan '12 - 3:37pm

  It is not true to say that capitalism, by which we mean free, consensual markets, values only that which contributes to gdp. Certain pro-market politicians value this, but free markets themselves are not a system or organisation and don’t have political values. You can’t force anyone to be a buyer, but under free markets you are just as entitled to sell 3 days working time per week as you are to sell 5 days working time per week, without some komisar tut-tutting that you are letting the side down. It’s your choice, hence the name free markets. in non-free systems such as practiced in Cuba trying to grow the gdp is part of the state plan everyone has to follow.

• robin Martlew 24th Jan '12 - 3:57pm

  There is in most columns a total confusion about what Capitalism actually is! I think it is the system that simply relies on competition for property that ‘belongs to’ and was probably produced by someone else and carries power, but precious little responsibility with it and excludes others from using it!
  I know I can bore for England on the theme ‘CAWKI (Capitalism as we know it) if unfair, inefficient, Undemocratic and unmanageable’. It is unfair because its benefits frequently don’t benefit people who have worked hard within its structure only to be discarded for no failure of their own. It is inefficient because it relies on a constant level of involuntary unemployment of people who could be adding to the choice of goods and services available, It is undemocratic because it increasingly concentrates power and wealth rather than diffusing it. I don’t think there is any way it can be seen as manageable in spite of the myriad of contradictory theories concerning its management!
  To those who declare that it is responsible for the very considerable advances in technology over the last couple of hundred years i suggest that it is probably responsible for inhibiting and distorting society equally. We can’t prove it either way because there is no way that we can evaluate what would have transpired with a better system! I concede that we don’t seem to have come up with a better system! That is what I think we should explore here!
  Capitalism is based predominantly on competition and acquisition I believe that Human Nature, or as I prefer to describe it, the Human Condition is based predominantly on cooperation and sharing. These cultures are poles apart and converting from one to the other requires a fundamental attitude change. CAWKI is not inevitable nor value free, nor natural. Freedom within CAWKI is illusory!
  We need
  to start focusing our efforts on the future, what we could be producing rather than what others have produced;
  a full employment that means everyone who can and wants to be, is employed;
  money focused on enabling people to contribute, not excluding them form contributing;
  money to reflect what people contribute and what they are entitled to withdraw;
  The Capitalist system is based on differential banking to enable it to lend money ex nihilo to people who can offer security.
  We need the banks to advance money on the basis of realistic business plans where reasonable risk is accepted by society and the banks are rewarded for the quality of their assessments and property must be maintained and used as effectively as possible.
  Where people are the centre of value, not simply discardable pawns in speculative ventures.
  It is possible!