In her hand, Kadena held a megaphone. Now, she put it to her lips.

“My game is over,” she told the crowd below. “It was a pyramid game. My company is bankrupt. And you shouldn’t ask for the money.”

There was a moment of stunned silence. In that half a second, the wave of one of history’s stranger financial manias finally broke, tipping Albania towards civil war, and levelling the hopes of a generation. “We didn’t even take the eggs from our chickens to cook for our children,” was how a guard standing outside an Albanian university put it to me, in November of this year. “We just sell them and put the money into the schemes. But what happened after that? Tragedy.”

It was, in short, the Ponzi that ate a country. I had come to Albania to make a documentary for BBC Radio 4, trying to figure out how an entire country fell prey to a con. At their peak, the many different Albanian schemes, of which Sude was but one, had liabilities of £700 million — in a country whose GDP was only £2.1 billion. Was there something about this small disc of the Western Balkans that had made it so vulnerable to contagion? What happened in Albania is easy to dismiss: long locked to the bottom of Europe’s economic league tables, it’s the ultimate far-off land of which we know little. But the story of how it escaped from brutal Communism, wide-eyed and optimistic, only to collapse under brutal Capitalism is one that has the air of a fable.

After all, it wasn’t just farmers and peasants who committed financial suicide. Up the social scale, the middle classes would sometimes sell their homes, move into rented accommodation, then put the house money into investments. In Tirana, I met a lawyer, Lazer Sokoli, who only managed to convince his brother not to sell his family home by threatening never to speak to him again. Months later, he was at dinner with the same brother and his brother’s friend, when a TV in a corner of the restaurant broadcast news of riots, as investors clamoured to retrieve their cash. “The whole place went silent. Not only had my brother’s friend sold his house but also his sister’s. He went crazy … it turned out he’d lost everything. He is now in Germany, working hard to make ends meet and trying to repay his sister little by little.”

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What fact checkers get wrong

By Gavin Haynes

How did an entire country fall prey to a con job? In 1945, Albania had become a hermit kingdom, under the grip of a tyrannical yet curiously uncharismatic dictator, Enver Hoxha. The borders were sealed. “I worked at a customs house,” Drago Kalimi, a former schoolteacher, told me. “Even when we welcome tourists in from Greece, we had to be accompanied by soldiers.” When, in 1992, the country emerged blinking into democracy, ordinary Albanians knew almost nothing of the outside world.

It’s perhaps understandable that they were naively optimistic when they elected as their first President, Sali Berisha, a tub-thumping former cardiologist. Berisha’s policy platform, as the analyst Remzi Lana put it to me, was: “everything in Communism, but with a minus sign in front of it.” From the stoniest socialism, Albania would attempt to take on the most free market of all capitalism.

At first, it worked. While the likes of nearby Bulgaria struggled to maintain a sluggish, hybrid economic system, Albania grew at more than 8% a year from 1993 to 1995. Some of that growth was real. But it gave plenty of cover for the pyramid schemes that were the nation’s undoing, which aimed to blend in. One, Vefa, actually had many genuine assets: they owned a chain of supermarkets, and petrol stations. Their name was on recognisable, everyday goods. It was natural to assume that they were legitimate, even if the rewards they offered were outsized.

“A cousin of mine was a broker for people looking to invest in these pyramid schemes,” explains the CEO of Tirana Business University, Artan Hoxha (no relation). “She was advising people to put some money in scheme A, some in Scheme B. Some in Scheme C. One has high interest but is not so secure; the other has low interest but is more sound. In her mind she was building a balanced portfolio. She didn’t know they were all the same shit!”

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How Albania became a pyramid scheme

By Peter Franklin

No one was offering Albanians sound advice. The nation now technically had a free press. But as the schemes grew in stature, they began paying for ads on the newly-emerged private TV stations, and in the new newspapers. The media bosses knew which side their bread was buttered; soon enough, the press began to speak only favourably of the schemes. “This was before the internet,” was a refrain I heard more than once. “We didn’t know. We just couldn’t check.” For ordinary people, rather than becoming the proving ground for truth and debate, the mass media had almost immediately succumbed to fake news.

Democracy, too, failed them. The scheme bosses were well connected. They mixed with the new political elite, and called in favours to keep the state’s eyes elsewhere. Of course, the ballot box should have been the ultimate check: governments that crash the economy don’t last long. But all the short-term incentives were to ignore the problem. In fact, in the middle of dealing with a disputed election, President Berisha actually sent ministers onto TV to all but guarantee that the schemes were safe. They grew even bigger.

After Sude had collapsed, the government did intervene in two schemes, sending in the liquidators and managing to recoup between 40 and 60% of the capital. But here, a curious kind of human psychology took hold. Instead of gratitude, the public mood hardened. Investors chose to blame state meddling for destroying otherwise perfectly decent companies. People were unwilling to come to terms with the true size of the lie they’d been sold.

But soon enough, for Artan’s cousin, Lazer’s brother, and millions of others, there would be no more excuses, nowhere left to hide. In the chaos that followed the schemes’ unravelling, the nation’s armouries were raided. 700,000 guns evaporated into a total population of 3.5 million. For months, every night the crackle of shots could be heard in the big cities as new owners took their toys for a spin. In the southern town of Gjirokaster, a middle-class couple who had lost the moderate sum of $5000 in the schemes told me how they’d padded the walls of their house with books, to absorb stray bullets. Night after night, the husband slept in their photographic studio, with the gun he too had taken from an armoury, standing sentry against looters.

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This is how civilisations collapse

By Aris Roussinos

The arc of the fable was now complete. In five years, Albania had gone from optimism and trust, to total disaster. Individual greed was supposed to power markets, but — un-tempered by oversight, checks and balances, a strong civic culture — it ended in beggar-thy-neighbour. Nineties Albania is perhaps an apt laboratory experiment in what happens when you leave things to themselves.

Added to it was its close relative: status anxiety. Many of the middle-class families I spoke to only got into the schemes late in the day. Partly, this was because they were more suspicious. But in the final phase of the mania, in mid-1996, many signed up because they felt they were missing out on what their peers had. “People didn’t ask questions. They had heard rumours that maybe the reason there was money was that it was being laundered,” Artan told me. “Most people were never concerned about where the money had come from. Just so long as they got their return.”

And for every investor who was genuinely naive, another was operating on the long-tested theory that there are always greater fools out there. Just as surely as anyone on the Lehman Brothers securities desk in 2008, they realised the schemes were doomed, but aimed to get out just before the whole house came tumbling down. Some succeeded. While thousands lost their homes in the crash, hundreds ended up with their own house and some other poor schmuck’s.

The mayor of Tirana tells me he still has people on his housing lists who lost their homes in ‘97. But in the past decade, Albania has quietly prospered. Today, the massive brutalist pyramid in downtown Tirana, originally designed as Enver Hoxha’s mausoleum, is being rebuilt as a coding academy, one sign of a building boom that has swept the capital. Increasingly, this is a land of Vodafone and Visa, well on its way to homogenisation within the EU empire.

Albanians seem to have survived by living in an eternal present. The country did not prosecute many of the crimes of Communism in the ‘90s, nor did it hold Truth and Reconciliation hearings. The maximum penalty for fraud — any fraud — was five years. Most of those who built the Albanian pyramids have long since done their time, if they were caught in the first place. In fact, many are now to be found in the swankiest restaurants of Tirana, rolling in and out of their SUVs.  “They say to me, ‘Arben how are you?’,” laughs the former finance minister, Arben Malaj.

But justice has seldom been high on the agenda in this part of the world. “Justice…” says Remzi Lani, “in general, it’s a kind of joke story in Eastern Europe.” With a weary Balkan fatalism, people have simply picked themselves up and moved on.

You can listen to The Great Pyramids Of Albania on BBC Sounds.

What little manufacturing that the North and Midlands had held on to was expected to collapse as barriers to trade went up. Vengeful Remainers were especially looking forward to the comeuppance of Sunderland — the city that delivered the knock-out blow to Britain’s membership of the EU. Good luck holding on to your Nissan car plant, suckers!

But five years on and Nissan is still here and expanding. A billion pounds is being ploughed into the production of electric vehicles and the batteries are included — Nissan’s partner, Envision AESC, will be building a ‘gigafactory’ to produce them. Vauxhall, meanwhile, is investing a hundred million into its Ellesmere Port plant. The factory will produce electric vans — for which demand is soaring. And there are reports that the British Government is working with Tesla to find a UK site for a major manufacturing centre.

Whatever one thinks of Brexit, these are developments that everyone should welcome.

But Britain wouldn’t be Britain without its moaning minnies. And there are two sets of people who aren’t happy: firstly, the hardcore Remainers for whom any assertion of the British national interest is pure jingoism; and secondly, the free market fundamentalists for whom any government intervention in the economy is a slippery slope to the Seventies, if not downright communism. 

There’s a lot going on to raise their hackles. The Nissan and Vauxhall deals won’t have happened without the Government fronting-up a portion of the overall investment. Last week, the ministers moved to sweep away the EU rules on state aid that stand in the way of further state subsidies. Ministers also decided to keep the trade restrictions that help protect the UK steel industry from cheap imports. And then there’s the National Security and Investment Bill, which was introduced last year to protect British companies from “malicious” foreign investors. 

Meanwhile, Labour is trying to get in on the Government’s act: Keir Starmer has unveiled a Buy British plan to bolster companies through public procurement. 

Critics on both Left and Right see any turn towards “economic nationalism” as a bad thing. But does it have to be?

If you believe in a borderless world in which we have no special loyalty to our compatriots, then any kind of nationalism is bad. But if, like most people, you do believe in the nation state — and that a national government should put its own citizens first — then what is wrong with nationalism in the economic sphere?

The most obvious answer is that free trade is a good thing — and that Britain should not disrupt the level playing field of international competition. It’s a nice theory, but it ignores the fact that the playing field is anything but level. British industry is fighting an uphill battle, because our competitors have no qualms about tipping the terms of trade in their favour. Just look at export-led economies like Germany and China.

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England's war with Germany will never be over

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Both of these countries benefit from rigged exchange rates. In Germany this is achieved through the single currency. If the Deutschmark were still around, you can bet that it would be trading at a much higher value against the Pound than the Euro does. This would make German exports a lot less competitive. As for China, it builds up enormous foreign currency reserves, while restricting access to its own currency. The result is a mismatch in demand that skews the exchange rate to the advantage of Chinese exporters.

There are other weapons in the armoury of the economic nationalist. For instance, EU figures show that, as a percentage of GDP, state aid to German industry is more than three times what it is Britain. Subsidy levels are also high in countries such as Hungary, Czechia and Poland — all of them key export markets and cheap labour suppliers for German industry. China subsidises its industries too — through direct support, access to low interest loans and crazy levels of infrastructure spending. It also protects its businesses from foreign competition while enjoying open access to western markets. 

So when the economic globalists talk about free trade, they don’t mean free trade at all. They mean that we should we leave ourselves wide open to the rampant economic nationalism of other countries. 

But so what? If these countries want to sell us their stuff at a knockdown price, then don’t we benefit? Let the Germans and Chinese do what they do best, while we concentrate on what we do best. That way we’ll all get richer. 

Except that we haven’t got richer. Not lately. The UK in particular has suffered from more than a decade of low growth. In terms of GDP per head we are bottom of the league of north European countries (a comparison that was gleefully seized upon by the SNP to make the case for Scottish independence). As for the rate of productivity improvement — on which all prosperity ultimately depends — we’re doing the worst out of the biggest western economies.

The free marketeers have got some explaining to do. This country has done more than most to follow their ideological prescriptions. We’ve thrown open our borders to the flow of goods, services, capital and labour. We’ve allowed foreign interests to buy up our companies and our property. Our public procurement policies emphasise value for money not buying British. For decades, we barely bothered with an industrial policy — and left business investment up to the private sector. And furthermore we’ve encouraged that investment with lower taxes and lighter regulation. 

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Labour isn't working

By Paul Embery

Why, then, aren’t we more productive?

But let’s not just look at the British economy in the abstract. We must also count the human cost. A low-skill low-wage economy comes at a terrible price to pride and hope. That’s especially true when these patterns of work define entire communities and regions. We should, of course, be thankful that we have a job-creating economy, but quality matters as well as quantity. 

The fact is that a policy of economic disarmament — of leaving Britain undefended against the economic nationalism of our competitors — has only delivered prosperity and wellbeing to some of our people. And that is not enough. British voters are demanding more, which is why our Government has tentatively embarked upon a policy of economic rearmament. Above all, this means doing what it takes to build up industries that provide high quality jobs. 

The sceptics will argue that the British economy is perfectly capable of doing that already. For instance, Julian Jessop in the Telegraph holds up the example of the UK’s tech sector. Britain is now home to more than a hundred tech companies worth more $1 billion. This is “a larger number than the rest of the Europe combined”, he says. No need for continental-style industrial policies, then.

Except that key centres of innovation — like London’s Silicon Roundabout — have benefited greatly from government programmes. Public funds have been been ploughed into the capital’s infrastructure — and also into Britain’s world-beating universities. The achievements of our tech entrepreneurs should be celebrated, but their industry has been supplied by the state with the vital resources of connectivity and brainpower.

There’s no reason not to give other strategically-important industries what they need to succeed too. What some industries require may be more specialised than others but the principle is the same. If individual companies can’t bear all the costs and risks involved, then there’s a case for government shouldering some of the burden.

Since the public purse is not bottomless, funds should be deployed where they will make the most difference. However, unlike a private investor, government has the ability and the duty to consider more than just the financial bottom line. Above all, there is goal of providing satisfying, well-paid work not just in some places but throughout the nation. 

In the end, that is what economic nationalism comes down to: economics as if every Briton matters. 

The ban had nothing to do with me. Instead, it seems that YouTube — a subsidiary of Google — decided to “terminate” (to borrow the company’s chilling phrase) TalkRADIO’s account because some of its hosts and guests contradicted “expert consensus from local health authorities or the World Health Organization.” Given YouTube’s recent introduction of new guidelines that prohibit the spread of “medical misinformation that contradicts local health authorities”, perhaps we should not be too surprised.

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Will Little Britain survive the woke bullies?

By Andrew Doyle

Yet as I know all too well, Big Tech censorship has become a common feature of every form of internet discourse. My satirical online persona Titania McGrath has been suspended from Twitter on at least five occasions, including a “permanent suspension” after she expressed her intention to attend a pro-Brexit rally in order to punch people in the name of tolerance. My assumption is that her detractors often team up and “mass report” her to the Twitter Police. Only the other day, an anonymous user posted an image of a copy of Titania’s first book, Woke: A Guide to Social Justice, after he had set it on fire. It’s a curiosity of our times that those who claim to be “anti-fascist” are so fond of burning books.

Equally striking is the fact that Silicon Valley’s social media giants are happy to embrace this climate. It’s a truism of online life that these companies operate with a sinister lack of transparency, deleting accounts or content at will. Their “Terms of Service”, for example, are purposefully nebulous so that anyone can be said to have violated them at any time. It’s a grim admission to make, but those of us who are repeatedly booted off these platforms often find ourselves accepting the seemingly arbitrary decisions of our overlords simply because it feels as though there is nothing we can do about it.

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The sinister bias of YouTube and Twitter

By Douglas Murray

Occasionally, we might lodge an appeal, asking for more details on how precisely we broke the rules, only to receive an automated response referring us back to the very set of rules we were questioning in the first place. It’s rather reminiscent of Josef K. in Kafka’s The Trial, punished for an unspecified crime that he is not aware he has committed.

But for all of Titania’s alleged sins, I can’t help but feel that TalkRADIO is a rather different beast. It’s an Ofcom-regulated and licensed broadcaster which has accumulated tens of millions of views. Perhaps that’s why YouTube back-pedalled late last night and reinstated the channel.

Its U-turn hardly matters. The point has been made: if Big Tech doesn’t like what you say, it won’t let you say it. Especially when it comes to the pandemic. And yesterday’s TalkRADIO “cancellation” is just the latest example of how Covid has escalated Silicon Valley’s restrictions on speech. Even a Lockdown TV episode featuring Professor Karol Sikora was recently removed from YouTube, probably as a result of his claim that the virus was likely to “burn out” and that levels of public immunity had been underestimated.

You could be forgiven for thinking that a distinguished oncologist and former advisor to the World Health Organisation such as Professor Sikora has something to add to the current debate, irrespective of whether or not one agrees with his analysis. Fortunately, the video was re-uploaded after YouTube claimed that the deletion had been an error.

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How Big Tech seduced the Left

By Geoff Shullenberger

Even so, if there is one lesson to be drawn from last year, surely it is that Big Tech censorship is expanding into every aspect of our lives. This has manifested itself in a number of ways, but most notably during the US election when the New York Post’s Twitter account was suspended for publishing an unflattering article about Joe Biden’s son, Hunter, and users were prevented from sharing the story.

It’s hardly surprising that, as Douglas Murray notes in his book The Madness of Crowds, the people employed to monitor content on Twitter’s “Trust and Safety Council” — a designation so dystopian in tone that it almost feels deliberate — are first tested in order “to weed out anyone with the wrong ideological inclinations”.

Inevitably, free speech sceptics have been making the same tired old arguments in response to the temporary TalkRADIO ban, most predictably the mantra that, thanks to the free market, “a private company can do whatever it likes”, including banning its users. Certainly this is true. But leaving aside the bizarre phenomenon of self-identified leftists calling for greater powers for faceless corporations, should this principle really be embraced? Should, for example, Facebook have the right to discriminate against gay people, or certain ethnic groups? Political orientation may not be an immutable characteristic, yet few of us would justify the suppression of political dissidents by the despots of history on these grounds.

In recent years, there has been a growing misapprehension that censorship can only be enacted by the state. But in reality, social media platforms are the de facto public square, and the companies that run them are effectively the arbiters of a substantial proportion of political discourse. This has generated uncertainty among libertarians whose fealty to the free market sits at odds with the fact that those of their persuasion are far more likely to be censored under these conditions. Meanwhile, the predominance of the identity-obsessed social justice movement in Silicon Valley has led to a self-contradictory phenomenon: an avaricious corporate oligopoly comprising those who nonetheless believe themselves to be ‘left-wing’.

And so these companies find themselves in a position to claim that they are platforms committed to the principle of free speech, while at the same time able to behave like publishers who seek to enforce limitations on the opinions that may be expressed. This has its perks, particularly as it means that whenever the likes of Twitter are sued for libellous material posted by their users, they invariably cite Section 230 of the US Communications Decency Act, which ensures that they are not legally responsible for content that they fail to remove.

The law was crafted out of an understanding that, given the proliferation of comment sections on news websites, it was always unfeasible to expect media outlets to be able to ensure that illegal content would not be uploaded. Yet now, this same law is being routinely exploited to enable tech giants to censor with impunity.

There are a number of potential solutions, few of which have been seriously explored. One would have thought that a discussion about a potential Internet Bill of Rights would be sensible, given that the Communications Decency Act is so obviously being abused for partisan purposes. Alternatively, the wording of the Act could be changed so that companies are not liable for specifically illegal material that appears, meaning that banning accounts for ideological reasons, or censoring posts simply because Silicon Valley staff find them offensive, would not be protected by law.

Failing that, we will have to resign ourselves to the solution that Titania McGrath suggested in her first book: “If you don’t want to be censored, don’t say the wrong things”.

But for that to continue, the rest of us must grant the young a place to make their own and a stake in the future. Fail to do that and the threads that connect the past to the present will fray and snap.

In that respect, our society is wearing thin. Indeed, across the West, we see social relations unravelling fast. Furthermore, the sense of belonging and purpose we so desperately need to rediscover is often at its most ragged among the most highly educated part of the population.

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Why the rich are revolting

By Ed West

What’s gone wrong? Ed West cites Peter Turchin’s concept of “elite overproduction”:

“…the socially dangerous situation where too many people are chasing too few elite places in society, creating ‘a large class of disgruntled elite-wannabes, often well-educated and highly capable… denied access to elite positions’.

“So while around half of 18-year-olds are going onto college, only a far smaller number of jobs actually require a degree. Many of those graduates, under the impression they were joining the higher tier in society, will not even reach managerial level and will be left disappointed and hugely indebted.”

Also for UnHerd, Mary Harrington looks at the decline of family formation among the millennial generation:

“A recent Pew report showed 30% of millennials living with a spouse and child, a fall of 10% on Generation X and a whopping 40% drop on the 1968 generation. That’s America, but ONS datashows the age of first child climbing relentlessly in Britain too — while the birth rate is falling in all cohorts save the over-40s.”

Both Ed and Mary also mention housing — as well they might, because it is here that we see the most tangible evidence of the deteriorating position of the Millennial left-behinds. So-called “Generation Rent” — i.e. the Millennials who can’t get on the housing ladder despite their degrees and knowledge economy jobs is now approaching middle-age and thus the point at which they’ll have enough years of work left to qualify for and pay off a mortgage. Remember that next year is when the oldest millennials (born 1981) hit their forties.

Look ahead another two or three decades and they’ll be retiring — a growing proportion of them never having become homeowners. A lot of them, still paying out a massive chunk of their monthly salaries to landlords, won’t have much in the way private pensions or savings either — so how are they going to pay the rent when they retire?

In Abraham Maslow‘s famous Hierarchy of Needs a secure and safe place to live is foundational to the higher needs i.e. “love”, “esteem” and “self-actualisation”. Of course, you can find these things without being a property owner, but having a home that you can truly call your own really does help.

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If we undermine the stability of the basics then everything else that people reach for — relationships, purpose and meaning — will also be destabilised.

Economically, socially and culturally, our future depends on solving the housing crisis.

*

That task has become all the more urgent — and immensely more difficult — because of the Covid-recession.

On Friday we got the latest GDP figures and, as expected, they’re nothing short of cataclysmic. Output shrunk by 20.4% in April alone and is 25.1% lower than it was before the pandemic. One of the worst affected sectors is construction, which is down 43.6% compared to January.

Of course, a lot of that loss of output is artificial — the result of lockdown restrictions. As these are eased we’ll see a bounce back in activity. The record decreases will be followed by record increases. But unfortunately the latter are highly unlikely to be as big as the former, which is what we’d need for a true V-shaped recovery.

A must-read new report from the Centre for Policy Studies by Alex Morton warns of a W-shaped recovery in housebuilding. The crash that’s happening now will be followed by a partial rebound as developers finish the projects they’d started on before lockdown. However, once that pipeline is exhausted, there will, in the absence of government intervention, be a second crash. Morton explains why:

“Life is hard for housebuilders in falling markets, since they are stuck with the costs of the land they have already paid for. This limits their scope to cut prices – if buyers are waiting for prices to fall, builders simply stop building rather than operating at a loss.”

Assuming that property prices stay depressed by the effects and after-effects of the Covid recession, developers will sit on their land rather than sell it at a loss (or an inadequate profit).

The report explains why the big developers are able to go into suspended animation. Firstly, they have major cash reserves. Secondly, their creditors are patient — the banks know that the money they’ve lent is effectively secured against the developers’ land holdings, so rather than foreclose it makes sense to wait until land prices go back up again. And, thirdly, only about 20% of the people working onsite are employed directly. A minimal level of activity can keep those occupied (supplemented this time round by the furlough scheme) while the outsourced workers fend for themselves as best they can. Many of the latter are migrant workers — a large number of which will return to their countries of origin when work dries up (and, presumably, all the more so in the midst of the pandemic).

When the property market begins to show  signs of life, house builders will cautiously expand their, output again — but not so fast as to stall the recovery in prices. And thus the recovery in house building — the final upstroke of the “W” — will most likely be long and shallow. In the last recession, after the banking crisis, it took half a decade to get back to the level of construction before the crash.

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If the same thing happens now, then that means years of drag on growth, employment and the supply of new homes needed to alleviate the housing crisis. It will also most likely mean another period of market concentration in which the big developers become even more dominant — because smaller, independent firms don’t have the resources to hold on through the slump.

*

What can government do to prevent this? Alex Morton’s proposal is what he calls a “Help to Build” scheme — that is a system of grants paid directly to builders for each new home built. The scheme would time limited and conditional upon maintaining a steady supply of new homes.

As an idea it’s more relevant than what the government appears to be working on. According to a story in the Financial Times, Downing Street is resorting to that old stand-by — reform of the planning system. If the proposals end up improving the quality of new development then that’s great, but the idea that planning restrictions are holding back the quantity of new development is one of the biggest and most persistent myths in public policy.

The number of permissions granted for new homes runs way ahead of the number of homes actually built. According to Morton, the most recent figures (pre-Covid) show that the level of the latter (homes built) is only about 60% of the level of the former (homes permitted). Meanwhile the Local Government Association points out that, over the last decade, more than a million homes have been granted planning permission that haven’t been built yet. So forget the standard narrative about nimbys, they are not the obstacle here.

What then does determine the number of houses being built? It’s pretty clear when you look at the figures. Over the last 40 years or so, there’s been an incredibly close relationship between new homes built and the total number of transactions in the housing market. Morton puts the ratio at one new build for every 8.5 to 12 transactions. Or to put it another way roughly 10% of all houses sold are new houses (the rest are second-hand). In fact, if you were to plot new build against transactions on a graph with the latter divided by ten, then the two lines would be almost on top of each other, rising and falling in almost perfect synchrony.

Why would that be? Well, it’s because the big developers — who dominate the industry — won’t sell houses (and thus the land they’re built on) until they make a profit on the land that they originally purchased. The more demand there is in the housing market (itself a function of the amount of finance available), the more houses can be built and sold without that supply overwhelming demand and pushing down prices. In a recession, when finance dries up and buyers are cautious, demand collapses and the big developers ration supply accordingly.

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Given how this system works, the only way for government to accelerate the recovery of house building is to subsidise it — either by ‘compensating’ the builders directly or by artificially boosting the supply of finance to purchasers through measures like the Help to Buy scheme (in which taxpayers’ money is lent out to fund deposits).

Help to Build is an improvement on Help to Buy, but it still amounts to life support for a fundamentally flawed system. With the house building oligarchy on its knees, now is the time to change the system, not subsidise it.

*

And make no mistake it can be changed. The ratio of one new build home for every ten sales in the housing market is not an immutable law of physics. It may have held true for decades, but only because this is a period in which the big commercial developers have built the great majority of new housing and have a stranglehold on the supply of building land.

Before the mid-1970s that was not the case. Local authorities and housing associations were still obtaining land and building houses on a massive scale. This doesn’t mean that the private sector was squeezed out — indeed, since the war, the commercial builders have never built more houses then they did in the 1960s. Furthermore, despite all the council housing, this was a period of rising home ownership — and, no wonder, houses were actually affordable, allowing the baby boom generation to get onto the housing ladder when they were still in their 20s and 30s. Most strikingly, that ten-to-one ratio between transactions and new build was more like five-to-one.

It’s worth noting that all this happened in the decades after the much-maligned 1947 Town and County panning Act came into force. So we should stop blaming the planning system, or the green belt, or all other convenient scapegoats . What caused the housing crisis — i.e. the last four decades of chronic house price inflation — was the shift in power over the land supply.

This must be taken out of the grip of the big developers — with publicly-owned ‘community land banks’ taking control instead. What these bodies would do is buy land, grant planning permission upon it and put in place the basic infrastructure. Commercial developers, housing associations, councils, social enterprises and self-builders would bid for the right to build on the serviced plots — and to sell and/or rent out the completed properties. At no point would the house builders own the land themselves. Therefore they could neither profit nor lose from its eventual sale. Instead, the end-purchaser would buy the plot from the community land bank and would pay the builder for the building in much the same way that one pays a builder for an extension.

House builders would cease to be land speculators, and would instead compete solely on the basis of the price and quality of what they build. They would have no incentive, or ability, to ration land supply to the market.

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Could coronavirus topple skyscrapers?

By Peter Franklin

Of course, the publicly-owned land banks that I’d like to see managing the land supply instead are ultimately underwritten by the state. If they mess up — buying land for more than they can sell it — would taxpayers end-up bearing the loss? No, they wouldn’t — not if the land were purchased at close to its market value as farm land and not its value as building land (the latter being a multiple of the former). Legislation must be passed to abolish the morally indefensible “hope value” principle — which entitles land owners to the capital gain that is created by the granting of planning permission for development. This uplift in value is not created by the land owner and therefore should belong to the country, be used for the common good and protect taxpayers against the ups and downs of the property market.

At first, the reformed land supply system would be used to boost social housing, as part of the Government’s emergency economic stimulus. But, in time, the system would be expanded to provide as much land as was needed to meet demand for new owner-occupied homes.

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OK, assuming this all works and a lot more land gets released into the property market, wouldn’t it put downward pressure on house prices? Absolutely it would, and quite rightly so. After all, we don’t just have a housing crisis because we’re not building enough houses, but also because houses are too expensive. In almost every other sector of the economy — from food to consumer electronics — we welcome lower prices. To be able to produce more for less is what economic growth is all about. It is what makes us richer. Driving out cost, improving quality and expanding output is what the market does best — when it’s not captured by vested interests.

The idea that a basic need like housing should be an exception — that we should positively welcome inflation — is absurd. Indeed, worse than that, it is a fundamental injustice by which an entire generation is being systematically ripped-off.

If charity begins at home, then fairness begins with housing. A land allocation system based on the monopolisation and manipulation of supply cannot be allowed to stand.

Suggested reading

The inequality that fuels our dangerous times

By Peter Franklin

In 2014, he made waves with a pointed warning to his “fellow zillionaires”:

“If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.”

Given recent events, one could be forgiven for thinking that “when” is now. Six years ago Hanuaer wrote:

“Revolutions, like bankruptcies, come gradually, and then suddenly. One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning.”

America is burning. The spark wasn’t somebody setting themselves on fire (a reference to the start of the Arab Spring), but the death of George Floyd at the hands of the police.

The anger unleashed last week was, first and foremost, directed at racism. But as important as the foreground issues are, we can’t ignore the economic issues in the background. Looking back at all the political upheavals of the last decade or more, I doubt that either the radical Left or the populist Right would have attracted as much support if opportunity were more widespread.

Money isn’t everything, of course, but if you have (or reasonably expect to have) a decently-paid job, a home to call your own and savings in the bank, you’re less inclined to burn it all down, whether literally or metaphorically.

If one image from last week captured the interplay of these foreground and background issues, it was a photograph of Jamie Dimon kneeling with staff in a branch of Chase Bank. There he was, the notoriously well-paid CEO of JPMorgan Chase, apparently ‘taking a knee’ in front of a bank vault.

It’s all very well for woke corporations to express their solidarity with oppressed minorities, but what we really want to hear from Dimon and the rest of the business elite is why they’ve been doing so well when so many of their countrymen haven’t. Why have wages stagnated? Why is home ownership in decline? Why is the rent too damn high? Why are we individually, and collectively, so deep in debt? Why have so many families and communities been left behind ?

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For Hanauer the answer is that prosperity is being hoarded at the top :

“The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.”

In the UK, we’ve also seen the top 1% racing ahead, if not to the same extent as in America.

And, yet, the most remarkable thing is just how little political pressure there is for change. Yes, we’ve seen a surge of radicalism and populism — but most of that energy has gone into fighting culture wars. Attempts by centre-left governments to raise taxes on the rich have been reversed — for instance, the wealth tax in France under François Hollande or the 50% top rate of income tax in the UK under Gordon Brown. Further to the Left, insurgents such as Bernie Sanders and Jeremy Corbyn have been neutralised. As for Right-wing populists, they’ve been kept out of power too. Trump, of course, is the big exception, but he’s no direct threat to the super-wealthy — indeed, he gave them a tax cut. He may go down to defeat this November, but if so, he’ll be replaced by Joe Biden, the ultimate establishment timeserver.

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Britain’s race pain is not the same as America’s

By Ralph Leonard

Just about everywhere, governments are plugging their deficits with borrowing, not higher taxation. To keep debt cheap, they resort to quantitative easing (QE) which artificially inflates the value of assets held by the rich.

The position of the wealthy has, therefore, held firm. It survived the banking crisis, the Great Recession and austerity. Whether or not it survives the Covid-crisis remains to be seen. Thus far, in most countries, support has rallied to the governing establishment and populists have struggled to stay relevant. We can be sure there’ll be more public borrowing and more QE. Stock markets are already anticipating the financial sugar-rush and are roaring back after the the Covid-crash in March.

It’s not that the rich won’t make losses. There will be individual bankruptcies. Some corporations will go under, others will be bailed-out. But as a class, their privilege look secure. Riots and culture wars, far from being an existential threat, are more likely to serve as diversions.

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Contrast the situation today with that of a hundred years ago. In the early and mid 20th century, there was an almighty push-back against the inequalities of the Gilded Age. In some countries, we saw the revolutions and police states that Hanauer talks about. Elsewhere, democracy prevailed, but with a shift to progressive taxation, the welfare state and reforms to curb corporate power.

So why hasn’t there been anything on the same scale in the 21st century? After decades of neoliberalism, this should have been the Left’s great opportunity to regain the initiative. They failed — and whenever they fail, they cry foul. As they can’t possibly have lost fair-and-square, there must be some kind of cheating going on. It could be Russian interference, the influence of social media algorithms or the eldritch power of a slogan painted on a bus. You see, it’s not enough for the other side to be simply mistaken, they must be conspiratorially deceitful. If the people are voting the wrong way, it’s because they’ve been lied to — indeed caught in a carefully spun web of lies. And this isn’t just about the fake news and propaganda, there are intellectual strands to this web too — bad ideas that lend a veneer of respectability to the low politics.

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The terrible threat of Wokenomics

By Peter Franklin

In respect to the distribution of income and wealth, there’s one such bad idea that comes in for more criticism than any other: ‘trickle-down economics’ — also referred to as ‘trickle-down theory’ or just ‘trickle-down’. Basically, it’s a supposed justification for inequality. The state should help the rich to get richer, because some of the benefit will diffuse to the rest of society. The wealthy trickle-down on us from a great height — and we should be grateful for it.

Except that that, on this definition, almost everyone is a trickle-down theorist. If you see any common good at all in allowing some people to be richer than others, then you’re in the club. From Adam Smith’s invisible hand to John Rawls’ Theory of Justice to Vladimir Lenin’s New Economic Policy — it’s all trickle-down theory.

Clearly, we need a tighter, more technical definition — one that can be ascribed to those who defend the neoliberal status quo. But that’s when you discover that trickle-down theory doesn’t exist.

Do a search on “trickle-down” and you’ll get a long list of speeches, articles, tweets and other arguments against the idea. Politicians like Bernie Sanders, economists like Paul Krugman, business people like Nick Hanauer (see above) — are all vociferous in their condemnation. What you’ll be hard-pressed to find, however, are arguments in favour of it.

That’s odd because there are all sorts of ideas the Left doesn’t like — for instance, monetarism or libertarianism — that free marketeers are happy to defend. But with trickle-down economics there’s nothing there to argue for. It’s a phantom — the cause of much fear and alarm, but lacking substance.

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Covid has exposed America as a failed state

By Aris Roussinos

This is what Thomas Sowell, the economist and social theorist, had to say about trickle-down:

“No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page History of Economic Analysis. Yet this non-existent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena… It is a classic example of arguing against a caricature instead of confronting the argument actually made.”

But might there be a real idea advanced by the Right for which trickle-down is simply the Left’s insult of choice? The most obvious candidate is the proposition that cutting taxes (especially on the rich) can increase tax revenues. That might seem counter-intuitive, but it makes sense. There has to be a point at which a tax rate is so high that it disincentivises whatever activity is being taxed, while incentivising avoidance and evasion. From a revenue raising perspective, the optimum tax rate will therefore be somewhere between 0% and a 100%. If the current tax rate is above the optimum, then cutting it will raise more revenue. This is the principle behind the famous Laffer Curve.

It’s a perfectly reasonable theory — most economists accept it to some extent. To use it to argue for tax cuts isn’t trickle-down economics, it’s just an argument over where the optimum tax rate is (albeit one influenced by ideological biases).

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The big problem with the Left’s trickle-down rhetoric is that it misdiagnoses what the Right gets wrong — and it fails to understand what motivates free market ideology.

Trickle-down suggests that the only benefit that most of us get from capitalism are the crumbs falling from the rich man’s table. But why would free marketeers subscribe to such a limited view of what their beloved marketplace can achieve?

With some justification, what they actual believe is that economic liberalism benefits just about everyone directly: both as producers, by setting people free to achieve their full economic potential; and as consumers, by providing the widest possible choice of good and services at competitive prices.

That’s not to say they don’t also celebrate the special contribution made by the most talented individuals — the entrepreneurs, inventors and other pioneers of material progress. But in doing so, and in asserting the right of such individuals to get filthy rich, they argue that the rest of us get much more than crumbs. In fact, thanks to those pioneers, we enjoy lives of plenty beyond the dreams of our pre-industrial ancestors.

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Are you ready for 'fully automated luxury communism'?

By Peter Franklin

So no trickle-down here, but a gushing torrent of wealth flowing in all directions. That’s the real narrative of economic liberalism — and as a summary of the last 200 years of economic history it’s at least partly true.

However, it’s not the last 200 years that most people care about. The politically relevant timeframe stretches back, say, two or three generations. Basically, we’re talking about the neoliberal era — a period in which taxes have been reduced, industry privatised, regulations relaxed and markets globalised.

And yet, over these same decades, growth and productivity have slowed, wages have stagnated and innovation has faltered. Tax revenues have not kept up with spending and public and private sector debt has grown. Oh, and the global financial system would have collapsed without taxpayer bailouts.

Just as the statist Left struggles to explain the last 20 years of political failure, the freemarket Right struggles to explain the last 20 years of economic failure. The best they can do is point to global progress against poverty, sickness, illiteracy etc. These things are to be welcomed, of course, but ‘the world is getting better’ is not the slam-dunk argument that the neoliberals think it is. Not when most of the progress is being made by implementing the breakthroughs of an earlier era (vaccines, running water, electricity etc) — and not when the countries making the progress (especially China) are openly authoritarian.

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And yet as the liberal West loses ground, the rich are getting richer — taking the lion’s share of our reduced rates of economic growth. The problem with free marketeers is not that they defend this state of affairs, but that they have no convincing explanation for it. Some of them might argue that we need even more tax cuts, deregulation, free trade etc — but who wants to listen that broken record?

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The cost of liberal economics

By Mary Harrington

Nick Hanuaer argues that economic inequality is itself the cause of slower growth. That’s because the rich spend a smaller proportion of their money than do people on ordinary incomes. Therefore if the rich take a greater slice of the pie, the economy is deprived of consumer demand and slows down.

That is why he wants to replace “idiotic trickle-down policies” with what he calls “middle-out” economics — i.e. measures taken by both government and business to boost ordinary incomes:

“If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.”

But if that’s the whole story then how have the rich got richer at a time when the middle has evidently not prospered?

The answer is that they have found other ways of enriching themselves. Instead of competing to provide better jobs, goods and services to the rest of us, they game the system to their advantage alone. Property speculation, asset stripping, tax avoidance, share buy-backs, taxpayer-subsidised low wage business models — there are many ways in which the rich can financially engineer and lobby their way to further riches without creating value. Indeed, they’re all about extracting value from what remains of the productive economy.

What’s killing capitalism isn’t trickle-down theory, but the trickle-up practices of the rentier class.

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Why low interest rates poison the economy

By Peter Franklin

Zoe Strimpel, one of UnHerd’s writers, tracks this evolution in her fascinating new book, Seeking Love in Modern Britain. She aims to put the contemporary dating scene and all its tribulations in a historical context to try to better understand “the modern British single”.

Contemporary dating has, Strimpel acknowledges, “attracted extreme analysis”, when, in fact, Britain has a long history of mediated dating that stretches far back before the invention of smartphones. It’s typical of modern daters that they can’t see beyond the successes and failures that pepper their own personal sex-dramas, but from Lonely Hearts ads to personal agencies, dating services have enabled  “growing numbers of people without the community or other social and personal bonds to meet a partner” since as long ago as the 17th century, with a rapid upsurge in the early 1970s.

Dating is changing once again, largely thanks to smartphones — though at present it has been turned upside down by the coronacrisis. As isolation and lockdown prevent most people from going on physical dates, the dates themselves are migrating online. My roommate, an avid user of Tinder, will have his first virtual date over Skype this week. A surge has also been reported in the number of people (overwhelmingly men) viewing webcam sites, as people swap dates and hookups for pornography.

So as more and more attention is paid to modern dating and its discontents, it is fascinating to read about its sociological antecendents.

By the same author

Why Incels are the losers in the age of Tinder

By James Bloodworth

The rise of mediated dating has occurred against a backdrop of increasing singledom. As Strimpel notes: “Single people categorised as neither married, divorced nor widowed, accounted for 21% of the population of England and Wales in 1970, and 30% of it in 2000.”

As our lives have increasingly revolved around work, we have become keener to outsource the search for romantic felicity. In the Eighties Strimpel’s “busy Thatcherite professional” was someone with little time to casually peruse the singles market in person. So instead, they outsourced matchmaking to a new generation of entrepreneurs and dating experts who promoted their services with an incongruent mix of booming sales rhetoric and romantic idealism.

But while the professional side of the dating game may have changed beyond recognition, the human side hasn’t. As is shown by some of the responses to personal ads that Strimpel relates. One female user of personal ads said that “most” of the men she met:

“Were not working and hadn’t for a long time yet they told me they had really good jobs when we talked on the phone. Several turned out to be married. Two were alcoholics, one had been in prison for a long time and finally one of them stole my car as he turned out to be a crack addict.”

The book is peppered with interesting insight as it moves through the years. Who hasn’t “finessed” their online profile today?

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Bring on cuffing season

By Zoe Strimpel

Strimpel uses her examples to unpick the psychological effect of the dating scene, which is also shared over across the decades. She describes “a new type of emotional pragmatism” that has “normalised failure”, contextualising the grievances of some of contemporary dating’s malcontents. In other words, in order to function effectively in the new dating economy a person must detach the ego from rejection and accept it as a part of the game.

But this was always true of dating to some extent. In an offline setting — let’s say a bar — one reason that most men are incapable of approaching a woman (men are still expected to initiate these things) until they’ve consumed a vast amount of alcohol is the fear of rejection. The fear this prospect generates among men — referred to as ‘approach anxiety’ by men who study the dynamics of dating — is vastly disproportionate to the potential downsides: the worst that usually happens isn’t even rejection but indifference.

Yet ‘rejection’ threatens the ego’s sense of self. To be summarily dismissed by a woman may mean that a man can no longer view himself as attractive to women in general or a ‘catch’. Or put another way and from a woman’s perspective, “to find Mr Right you have to meet a lot of Wrongs first,” as one of Strimpel’s interviewees puts it pragmatically. This can be avoided in an offline situation by embracing a passive idealism that views romance as a question of predestination: one day you will meet ‘the one’ without the need to walk through the fire of repeated rejection.

Contemporary online dating is — to some extent at least — a rupture with this. As Strimpel puts it, the onus is on the individual — male or female — to “[reshape] the courting self as a self-fashioned product that would succeed or ‘sell’ based on the effort — emotional, psychological, physical — put into it”. In other words, rejection is ubiquitous so one had better get used to it.

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Why arranged marriages make sense

By Ed West

This is especially true for men who are far less sexually selective than women — even popular men’s profiles on Tinder get far more rejections than matches (many men regularly report getting no matches at all). This predates the Tinder age and is rooted in biology. As Strimpel writes of the response to personals ads that appeared in Time Out magazine: “Female advertisers, particularly young ones, were ‘inundated’ with messages, while men received far less attention.”

Romance, like religion or political ideology, is a story, an illusion we foster in order to give life meaning and make it several degrees more tolerable. It is an evasion of the absurdity and ultimate futility of existence. There is no unconditional love — love outside a close family is always conditional — just as there is no nirvana, paradise or classless society.

Indeed, one reason contemporary online dating seems to make some people uncomfortable is its exposure of the inherent inequality of the ‘sexual market place’. As Strimpel writes: “Mediated dating, in exposing the context of love’s production, was not compatible with the retention of romantic idealism.” Contemporary dating has brought with it a greater degree of opportunity for some, yet as I noted in a recent article on involuntary celibates, this abundance of theoretical choice has merely entrenched a sense of scarcity for others: the opportunity to meet new people has in practice translated into an opportunity to fail harder and suffer rejection repeatedly.

Yet amid this ruthless perusal of the catalogue of potential matches, romantic idealism continues to purr away in the background like the hum of a refrigerator. “The mystery of the balance between pragmatism and destiny in contemporary approaches to love remains unresolved,” writes Strimpel.

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What's the point of sex?

By Peter Franklin

I would argue that it is unresolvable. Online dating exposes the ruthless underlying dynamics of sexual attraction and, in the process, invariably strips away the idealism. One can become cynical about the need to ‘market’ oneself in order to outmanoeuvre fellow suitors, or one can embrace the potential for self-improvement that comes when one realises that one’s destiny is in one’s own hands, so to speak. Of course, for some this is easier than for others.

Everything in today’s world feels more uncertain, transitory and individualistic. Dating is no exception. The world of singledom is, much like the free-market economy, “inherently full of potential, and redolent of failure”, as Strimpel writes. One can reinvent oneself and develop strategies to succeed. And yet, as Strimpel notes: “In buying the chance to rifle through a range of options, the [modern] dater … also became one of many options to be rifled through and potentially dropped”.

The transformation in our dating lives thus loosely mirrors changes that have occurred in other areas of society in recent decades, most notably in the economy. If you are a winner then the rewards are potentially astronomical. If you are one of the unlucky ones however — conventionally unattractive, disabled, poor, elderly — this new abundance of choice can merely exacerbate existing feelings of personal failure. The fact that others appear to be thriving in this new reality makes the sense of not measuring up even harder to bear.

Yudkowsky is a strange character; he’s a key figure in my own book, The AI Does Not Hate You, about a group of people who worry about (among other things) an AI apocalypse. But he and they are also interested in why we are so bad at fixing the world’s problems.

Dominic Cummings, the senior adviser to the Prime Minister, is also interested in these ideas. I know this because we mix in similar internet circles. His latest post is a job ad, asking for maths nerds, data scientists, project managers and general “weirdos” to come and work with him in No 10. His first line is a quote from a 2017 Yudkowsky tweet, about “the bad Nash equilibrium in which the US and many other governments are stuck”. 

A few lines later, he mentions “low-hanging fruit — trillion dollar bills lying on the street”, an apparent reference to an ongoing theme in Inadequate Equilibria, based on an old joke about economics. The joke goes like this. There are two economists walking down the street; one of them says “Hey look! Someone dropped a £20 note.” And the other one says: “Well, it can’t be a real £20 note, or someone would have picked it up already.”

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The 10 brains behind Dominic Cummings

By Peter Franklin

The joke refers to the efficient markets hypothesis. If you think you can get rich quick by buying stocks, you’re probably wrong, because millions of smart people are also trying to do the same thing. And they’ll all buy stocks in the companies that they think will do well, so the stocks of those companies will go up. If a stock is even a tiny bit underpriced, hedge funds can make billions by buying it, and they’re watching every second, so it’s very unlikely that you — Random Citizen X — will have better information than they do. 

The efficient markets hypothesis obviously isn’t completely true. It is possible for people to make money in stocks; in reality, you do sometimes find notes on the floor. But it is mainly true: most stocks are appropriately priced, and if you were to see a £20 on the floor of King’s Cross Station in London with thousands of people walking past every hour, and it had been there all week, then you could confidently predict that something weird was going on.

But, says Yudkowsky, if you take this idea on a bit, you can end up accidentally proving that nothing can be wrong with the world. If you think that, say, your city’s public transport is overpriced and inefficient, then obviously someone could open a cheaper, more efficient bus service, undercutting the existing ones. It would make lots of money and put the other ones out of business. So saying “the public transport system is bad” is a bit like saying “there is a £20 note on the floor of King’s Cross and no one has picked it up”. Medicine can’t be improved because, if it could be, someone would already have done it. Science can’t be broken because if it was, someone would have made an un-broken version and won all the Nobel prizes. House prices can’t be too high. If you’re not careful, you end up as Leibniz or Dr Pangloss, saying that all is for the best in the best of all possible worlds. 

And yet, Yudkowsky points out among several other examples, 33% of babies with short bowel syndrome die in the US because the standard FDA-approved intravenous nutrient fluid has the wrong mix of lipids. The correct mix has been known for decades, is just as cheap, and prevents all the deaths. No one wants babies to die. But somehow it doesn’t get fixed. This is very hard to square with the Leibnizian position.

By the same author

Dominic Cummings is no chicken

By Tom Chivers

I think this is what Cummings is driving at. It’s hard to tell, because it’s just a job ad, and even his longer pieces seem to me, usually, like a grab-bag of loosely connected tech/management/AI buzzwords, rather than a coherent argument. But I think he’s interested in why things go wrong even when no one wants them to. It’s easy to blame bad people — the Tories, or billionaires, say — and maybe that’s sometimes true, but I suspect it’s usually a comforting self-deception; it’s much gloomier to think it’s a systemic failing of human thought.

Yudkowsky suggests that there are three main ways in which societies can get stuck in these “inadequate equilibria”, bad situations that no one wants but which we can’t get out of. 

The first is bad incentives. The efficient markets hypothesis, and the free market in general, relies on people acting self-interestedly. If everyone knew that the £20 lying on the floor of King’s Cross would have to be donated to HMRC if they picked it up, then people would be less likely to do so. 

An example of this that Yudkowsky uses is the Japanese central bank, which for years kept a tight monetary policy. Many economic bloggers, including Scott Sumner, suggested that printing more money would be better. But because the Japanese central bank’s monetary policy was set by a committee of a few bankers, none of whom would make any extra money if Japan’s economy improved, the market had no way of influencing it.

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Will maths succumb to the woke wave?

By Douglas Murray

The second cause is bad information. If I am buying a used car from you, I might ask if the car is any good. You will say “yes”. But you would probably say that even if it weren’t. So I can’t work out what the right price to pay for it is. So the used-car market becomes a lottery: good cars which should sell for more money don’t, and bad cars get sold for more than they’re worth. You can’t tell, among all the people saying “this used car is great”, which ones are telling the truth. 

Similarly, in cases like the short bowel syndrome babies, there probably are hundreds or thousands of parents and doctors screaming: “Look, babies are dying because of this simple mistake.” But loads more people are also screaming about babies dying because of vaccines or austerity or any number of more or less spurious reasons. And it’s hard to tell which ones are real and which ones aren’t. So lots of real ones get ignored and lots of fake ones get picked up. You can’t tell which ones are telling the truth. 

The third and final cause is the “bad Nash equilibria” mentioned at the beginning. A Nash equilibrium, in game theory, is a stable state in which the players cannot improve the situation by changing strategies. For instance, in the prisoner’s dilemma (if played only once), the two players will always do best if they defect, even though that’s worse than if both of them cooperate, because if one cooperates while the other defects it’s worse for the sucker. You need to coordinate both players to cooperate at the same time, and that’s hard.

An analogous situation (lifted from Scott Alexander) is that no one wants to be on Facebook — it’s terrible and incomprehensible and it steals your data. But no one can leave, because going off and forming your own social media system isn’t going to work. You’d just be there on your own. To leave, you need to coordinate millions of people to leave at the same time, and that’s hard. Google tried it, and failed utterly; if Google can’t do it, you can’t.

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Who whacked Jensen Huang?

By Graeme archer

I think (I hope) that Cummings’s job ad is about trying to get people who think in these terms into places of government. I don’t know whether it will make a serious difference. But there are problems in the governance of the UK which analogise quite well to these situations. 

For instance, incentives. No one I’ve ever spoken to who’s involved in drug policy — not academics, not clinicians, not police — thinks that it’s a good idea to imprison people for possession offences. And after they leave power, every politician seems to say how important it is that we stop doing it: even former home secretaries who could once have done something about it. But still, we do it, because the people in power are not incentivised to save the exchequer money or to save lives – they’re incentivised not to look soft on crime.

Or, bad information. I notice that Cummings mentions Philip Tetlock in his blog post. Tetlock, whom I’ve written about before, is the thinker behind the Good Judgement Project and “superforecasting”. The groups he works with get the best results — better than CIA analysts — at predicting future world events, and there are fairly simple methods that they use to improve those skills. A better skill at forecasting the future would be immensely useful for the UK government. But there are thousands of cranks pushing “one weird trick”-type solutions, and it’s very hard for government advisers or ministers to tease out which are good and which are bad.

And finally, Nash equilibria. I think most people who care about the subject nowadays agree that our First Past The Post (FPTP) voting system is no longer fit for purpose. But to change the system, you first have to win under FPTP, and once you’ve won under FPTP, your best strategy is to keep playing under it. To get out of it, you have to coordinate all the players to change at the same time, and that’s hard.

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How politics makes us irrational

By Tom Chivers

Bringing in maths nerds and weirdos won’t fix any of this on its own. The incentives and bad information and coordination problems will still exist. But it’s pleasing that someone close to government is thinking about it. Anecdotally, lots of nerdy oddballs in DM groups and internet forums I hang around in, people who would never consider themselves for government jobs normally, are thinking about applying; I saw a post on an effective altruism site calling for people to apply. Maybe it’s just that these are my sort of people, but I’d be happy to see more nerdy, techie types in government.

It could go wrong. Lots of very sensible clever people I admire have written things pointing out that a naive belief in the power of maths to fix problems won’t get us anywhere, and that the Civil Service is actually much less lacking in maths-ability than the ministers who make the decisions. And that’s true — and I also think that there’s probably a lot of hard-to-understand local knowledge in the Civil Service, and if you sweep all that aside and replace it with nerdy 23-year-olds it’ll go badly wrong (Chesterton’s fence and all that). It’s a bit unfair to say Cummings is only interested in maths and science nerds — only one of the seven job categories he mentions is explicitly STEM, the “data scientist” – but that’s clearly his focus.

But I do think there are some relatively simply fixed problems in the governance of this country which could, in theory, be fixed quite easily, by a government with a big majority which doesn’t need to care about short-term popularity and which is willing to do some fairly unusual things.

What about, say, some proper A-B testing of policies? It can, as I’ve mentioned before, do real good but which is weirdly unpopular in political situations. Or how about taking some hot-button things out of direct political control (I’ve seen people suggest the NHS!), in the same way the Bank of England was by Blair? That would avoid some of the bad Nash equilibria, and the bad incentives – especially if combined with reforms that made those directly in charge of it responsible for whether it works or not.

But don’t ask me. I’m not weird enough to apply. Maybe we should just pick up a few of those £20 notes lying on the floor of King’s Cross Station instead.

Tibetans are no longer à la mode, though the destruction of their civilisation by the Chinese state continues, and few opinion-formers consider the persecution of Christians in the Middle East worth mentioning. Little is heard any more of the Yazidi, despite their still being a target of genocide by Isis. The Kurds are receiving media attention following their betrayal by Trump, but it will surely not be long before they are re-forgotten. Being identified as a victim of injustice has become a kind of privilege, handed out to favoured groups and denied to others according to the shifting diktats of progressive opinion.

A certain arbitrariness goes with demands for social justice. Possibly for this reason, SJWs (social justice warriors) are intolerant of criticism. In the US, anyone who argues that despairing Appalachian proles might be more deserving of concern than middle-class student protesters is condemned as a white supremacist, and their views suppressed. The suggestion that individuals and groups may suffer different degrees and kinds of injustice is rejected as reactionary thinking. Overthrow the prevailing power structures, and injustice will simply vanish. Anyone who questions this vision is not just wrong but evil.

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How the liberal West is dismantling itself

By John Gray

The trouble is that the imperatives of social justice are inherently conflicting. Distributing the goods of society according to equality and merit are not just competitors in practice. Merit and equality are inherently antagonistic values. A number of recent studies have argued — correctly — that the meritocratic claims of western liberal societies are at best partly justified, if not actually fraudulent. But a society that was perfectly just by meritocratic standards would be extremely unjust in egalitarian terms. Some injustices may be worse than others, but no world is imaginable which all the demands of social justice are fully realised.

Markets are condemned because the distribution of income and wealth is partly random. But so is the distribution of genes. If you aim to correct randomness in human fortunes, you may end up in the dystopian world of L.P. Hartley’s Facial Justice (1960), in which people who are “facially over-privileged” are encouraged to have their looks surgically altered. Conversely, gross disparities in educational opportunity are accepted as long as they cannot be defended in terms of merit. In the 1830s Lord Melbourne declared he liked the Order of the Garter best of all his titles because there was “no damned nonsense about merit” attached to it.

Egalitarian thinkers take a similar line today. Selection by ability by grammar schools is rejected by large swathes of progressive opinion. Quite a few seem to find it less objectionable to send their children to schools where selection is by parental income.

Contrary to a familiar line of criticism, there are few signs of hypocrisy in these people. Hypocrisy requires a measure of self-awareness, and there is little evidence of that in them. When they buy an expensive education for their children, might they not be expressing their conscientious revulsion against the evils of meritocracy? No doubt egalitarians who send their children to private schools — or are well-heeled enough to buy a house in a catchment area containing a socially selective comprehensive — are stacking the life-chances of their offspring against those of the majority. But why should any child be denied the good fortune of having progressive parents?

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Who will resist the great awokening?

By Eric Kaufmann

When it does not lead to tragedy, the pursuit of social justice quickly turns to comedy. It is tempting to conclude that the very idea should be junked.

That was the argument of F.A. Hayek, strongly articulated in his magnum opus The Constitution of Liberty and reiterated in the second volume of his trilogy Law, Legislation and Liberty: The Mirage of Social Justice. Market processes emerge and operate spontaneously, and the resulting distribution of income and wealth does not correspond to any criterion of a just distribution. Markets reward luck as well as talent and hard work. Being in the right place at the right time is as important in determining anyone’s fortunes as their abilities or virtues. The defence of free markets turns on their superior productivity, not any theory of rights or justice. For the same reason, Hayek opposed any attempt to correct market distributions for the sake of fairness. In his later writings he showed some sympathy for John Rawls’s theory of justice, but this was because Rawls rejected the idea that justice meant redistribution according to what people may be thought to deserve.

Like Rawls and the egalitarian left, Hayek rejected any ideal of meritocracy. In conversations I had with him in the Eighties, he often observed that the fact that the free market operated without regard to anyone’s beliefs about the good life was for him one of its advantages. The price of a virtuous economy would be stagnation. A certain moral indifference was necessary for continuing economic progress. In praising the amorality of free markets, Hayek was influenced by the Anglo-Dutch economist and satirist Bernard de Mandeville, author of the early-18th-century poem Fable of the Bees, which argued that the driving forces of wealth creation and prosperity were needs and impulses that Christianity condemned as vices.

Because it invokes values that are inherently antagonistic, social justice is indeed a mirage. But so is Hayek’s libertarian ideal of a social order in which the market operates without any controls. It is striking how little Hayek learnt from the political disasters of his lifetime (1899-1992) in which liberal regimes were repeatedly swept away by malfunctioning markets. The Nazis came to power on the back of massive economic dislocation. Roosevelt’s interventionism and British social democracy were responses to the Great Depression and the experience of full employment during the Second World War.

Hayek opposed government intervention in the economy because he believed it to be a threat to liberal values. The message of history, however, is that the surest way to overturn a liberal regime is to let the market rip. Events after Hayek’s death confirmed this lesson. The anarchic capitalism of the Yeltsin era produced Putin’s authoritarianism, and post-communist Europe’s populist regimes came to power partly because former communist officials so often benefited most from the shift to a market economy.

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Why I've reported Douglas Murray to the police

By Titania McGrath

If capitalism is legitimated solely by its productivity, anyone who fails to benefit from the wealth it creates has no reason to support a market system. A free market regime will be stable only if it delivers more or less uninterrupted growth and most people benefit from it. Except for a minimum income that protected against destitution, Hayek rejected any kind of intervention in the distribution of income produced by free markets. Yet as he acknowledged in his nod to Rawls, policies that alter market outcomes need not serve ideas of merit or moral deserts.

At present, when large sections of society have failed to benefit from many years of economic growth, measures going well beyond securing people against destitution are required. The goal must be to ensure a decent measure of economic security to everyone. Such policies need not invoke any ideal of social justice. The NHS does not exist in order to transfer resources from the healthy to the unwell, or even to provide medical care to those who cannot afford it. It is there to enable everyone to share a part of their vulnerability in common. Institutions of this kind do not serve distributive ends. They promote social cohesion, and thereby political stability.

Thinking about common institutions in this way is not another iteration of liberalism. The liberal preoccupation with distributive questions is part of the problem. What is needed is to shift to a way of thinking that is clearly post-liberal. Security and the need for a common life must be acknowledged as values that are as compelling as personal freedom, and frame a more coherent picture of a liveable society than inchoate visions of social justice.

The shift may be too great for liberal societies to accept. Protecting people from market-generated insecurity may involve some reduction of overall economic growth. In turn, any long-term slowdown requires high levels of solidarity among those affected. The social democracies of the past were all relatively closed societies — avowedly multi-ethnic but not radically multi-cultural. In practice, multi-culturalism is not so different from anomic individualism. Many are caught between communities and left without a common form of life. Yet that does not mean that large numbers yearn for release from the moral poverty of individualism. Many want greater security than they enjoy now, but not at the price of sacrificing the liberty to live as they please. It is a mistake to think most people in the affluent west want a different way of life.

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Taking on the Social Justice Warriors

By Eric Kaufmann

The largest obstacle to a shift in thinking on these issues is the zeal with which ideas of social justice are held and promoted. The goal of most SJWs is not to repair or improve society. Instead, they want to overthrow the existing social order. Accordingly, they are untroubled if pursuing social justice is actually socially divisive. Like Lenin before the revolution, they believe “worse is better”.

If there is anything approaching an iron law in history, however, it is that revolutions are followed by injustice worse than existed in the ancien régime. The French Revolution produced a war against the peasantry in the Vendée (1793-1796) which cost somewhere in excess of a hundred thousand lives. The Russian Revolution produced a lesser known peasant rebellion in the Tambov region (1920-21) in which similar or larger numbers perished. The American Revolution is no exception. For indigenous peoples, which under British rule were sheltered from settler expansion, it was an unmitigated disaster.

But history has no lessons for the “woke”. To accept that revolution only multiplies injustice would destroy the meaning of their lives. The social justice movement is not based on errors in fact or reasoning. It is a cult, whose chief beneficiaries are the SJWs themselves.

At this point we are back to Pascal. He was able to view the shifts and turns of human ideas of justice with equanimity because he was confident a higher justice existed. Lacking any such belief and incapable of living without a surrogate faith, SJWs find meaning in the fantasy of a secular millennium, a battle between good and evil followed by a world they cannot imagine.

They helped to lift almost a billion people out of extreme poverty between 1990 and 2010. And they drove the so-called ‘Great Enrichment’ – the period since the late 18th century in which real per capita income has risen by 3,000%.

In general, then, open markets are a boon. And the modern rhetoric of ‘free markets’ has had huge value: in the fight against communism in the 1970s and 1980s, in highlighting the dangers of modern socialism in states such as Venezuela, and in making the case for the modern international trading order.

But like all rhetoric, free market rhetoric is better used for put-downs than for policy. It often misses the complexities of modern tech-enabled markets, and underplays the role of the state in creating and sustaining markets. Moreover, it smuggles in a host of mistaken assumptions and ideas, with potentially dire longer-term consequences. Markets are not merely mathematical constructs; they have social and cultural functions as well as economic ones. And they are all different – some very different indeed, from others.

In my recent book on Adam Smith, and in a new essay in Britain beyond Brexit by the 2020 Conservatives, I address these issues directly. What matters is not the rhetoric of free markets, but what that rhetoric often, paradoxically, impedes: the reality of effective competition. More effective competition requires better ways to think about markets, and new means to tackle the lurking monopolies of the tech giants.

Suggested reading

Why Adam Smith would approve of Boris

By Tim Montgomerie

It also means we need to bust the myths.

Myth 1: the truth is that in the modern world there are very few, if any, entirely free markets – markets that do not rely on any external rules or regulations at all. Even the most devout free-market theorists recognise that property rights need to be clear, public and enforceable, and that generally means law, police, courts and other institutions of the state. Some will actively argue for patent, copyright and other laws protecting intellectual property, but these are themselves significant infringements on market freedoms.

This catalogue merely scratches the surface. In fact, there are many things that generally cannot be legally bought and sold at all: people, body parts, hard drugs, votes, court decisions, public qualifications, the outcome of sporting contests. Then there are items that in many countries can only be sold under licence: guns, alcohol, and many medicines.

There are regulations on who is allowed to work: on child labour, on immigration, on the professions and the qualifications needed to enter them. There are regulations on organisational form: companies, associations, partnerships, mutuals, cooperatives, employee-owned firms, charities. There are entry requirements for some industries, such as tests on ownership, capital and track record in banking.

And then there are rules on product safety, on weights and measures and on conditions of trade, such as the right to a refund. The global foreign exchange markets are often thought of as the nearest thing to a perfectly free market. It is true that they are astonishingly large and astonishingly liquid. The Bank for International Settlements estimated, for example, that trading averaged $5.1 trillion a day in April 2016. Yet they are also very closely bound by rules and regulations.

Myth 2 concerns how markets function. Markets are far from identical to each other, and do not all operate to a single equilibrating mechanism. Markets for food products are very different from asset markets; financial markets differ radically from labour markets; markets in primary goods are different from secondary or resale markets in those goods.

Suggested reading

Is capitalism immoral?

By Victoria Bateman

To take a few examples: in product markets, buyers know fairly precisely what they are getting in advance. This is not the case in labour markets, despite the best efforts of recruitment consultants. In financial markets, the edge for participants generally lies not in serving some need in the real economy, but in knowing what their competitors are doing and second-guessing them.

The British housing market has evolved into a form of proxy savings vehicle in which price inflation, far from being despised, is actively welcomed by owners keen to see their properties increase in value. The owners’ reliance on mortgage finance makes them preternaturally sensitive to interest-rate changes, conditioning both domestic politics and central bank monetary policy. The German housing market, by contrast, is dominated by rental and leasehold properties, reducing both political tolerance of and economic exposure to house price inflation.

Myth 3 is about culture. Markets shape our lives, our homes, our possessions – even the music we listen to. And yet, they do much more that this. They shape our expectations of others, our manners and our capacity to trust, and those things in turn shape them.

Markets are not merely antiseptic objects of expert study, or neutral tools of public policy. The people who trade in them are not economic automata operating purely in accordance with financial incentives. On the contrary, markets are subject to ‘animal spirits’. These are the human passions of confidence or pessimism in the face of the unknown, as well as the human instinct to be moved by stories and narratives, and to react to unfairness or corruption.

In sum, markets constitute a created, constructed order. Of course, foolish government interventions can undermine or even destroy markets. But far from being intrinsically opposed, states and markets rely on and benefit from each other. Indeed, they rely on each other more and more today, as competition increases pressure on public resources, private property rights become more contested, and globalisation drives the need for enforceable international standards.

The old bromide that “the private sector makes the money and the public sector spends it” misses a deeper and more interesting truth: that both require each other to function effectively. To take a recent example: the Space Industry Act 2018 sets out law to enable a person or company to put a private satellite in space from a UK launch site, and to cap their liability. The result is expected to be a new era of British space entrepreneurship — all made possible by an Act of Parliament.

Suggested reading

Ctrl + Alt + Del. Conservatives must reboot capitalism

By Ruth Davidson

What does this mean? As an ideology, neoliberalism is dead. Meanwhile, the debate we as a society need to have – the debate about what markets are and should be for, about the limitations of the idea of ‘market failure’ and the role of the state – has been left by the wayside.

Modern technology has brought with it rapidly increasing complexity in markets, as choices proliferate for consumers. Public attention has rightly focused so far on the use of intra-company transfer pricing and other devices to reduce tax payments to a minimum, and on escalating concerns about privacy and the manipulation of public opinion. But we also need to think again about competition policy.

Companies such as Google, Apple and Facebook enjoy gigantic and increasing asymmetries of power and information versus the individual consumer. These asymmetries allow them the scope to exploit their consumers, both in specific segments, in groups, or individually in ways that run counter to established norms of fair dealing and justice.

These businesses are modern titans which bestride their markets as completely as did the old oil and railway trusts. They are hard for government or regulators to scrutinise, because they are closed systems. But at the same time their status as networks means the normal armoury of regulatory tools against market monopoly or oligopoly is far less effective.

In due course, the world will need to have a deep debate about the astonishing power, and the astonishing absence of accountability, of the technology platforms. But in the meantime, we can look at competition policy. More transparency and disclosure are a prerequisite in this regard, yet markets all being different from one another, different levers will be needed to achieve it.

The Standard Oil Company was broken up after 1911 under the Sherman Act into a host of smaller (but still enormous) oil and gas companies, including what would become Exxon, Chevron, Conoco, Mobil, Amoco and Sohio (the latter two later bought by BP).

Few if any people seriously believe that Google could be effectively broken up into different regional or business units, or that to do so would generate economic value. But that approach might work better for Amazon, with a split between its marketplace and product provider functions, and national or regional services working from a common back office but competing against each other in the marketplace.

Suggested reading

When competition ends in conspiracy

By Jonathan Tepper

As for Google and Facebook, we can lift an idea developed by the father of economics and social psychology, Adam Smith. Human shoppers can be supported by new algorithmic consumers – that is, by pieces of software able to compare and contrast different offers in the digital marketplace and make choices on the human’s behalf.

Imagine trying to choose the best home insurance in such a world, instead of poring for hours over dozens of sites and hundreds of products, or using potentially costly price-comparison sites. You could have your personal online assistant do it for you, in its own time and using networked computational power.

Over time, such online assistants are likely to become commonplace; still more so if data comes to be seen as a public good created by individuals, rather than simply accumulated by companies. These digital agents could, in principle, make automatic purchases subject to individual guidelines, negotiate transactions, and even build coalitions with other digital consumers automatically in order to get keener prices or elicit new products.

There is no reason why an array of new businesses should not emerge to enable this levelling of the playing field to take place. They will require coordinated regulatory intervention, but there is no reason to think that any of this is technically, economically or politically impossible.

These ideas come from recognising the limitations of free-market rhetoric, grasping the possibilities offered by a really deep understanding of markets, and pushing hard for more, and more effective, competition. They can potentially set the new trading and trust-busting standards of the digital future.

First, all my political energy has been a reaction to Margaret Thatcher. I hated and continue to hate Thatcherism with a passion that remains undimmed, even after all these years. There have been moments when I wondered if I should have gotten over it by now. But I can’t. It is too deeply and furiously embedded in my psyche.

In the name of the free market, she trashed the long established infrastructure of care and civility that held us together as a country. Not since the Dissolution of the Monasteries has a whole pattern of social care been so thoroughly and successfully wiped away. In particular, she eviscerated northern working class towns, held together by mining and heavy industry, that were the heart of this country.

Second, my philosophical point: Mrs Thatcher wasn’t really a Conservative at all. She was a turbo-charged classical liberal who believed that the freedom of the individual, and most especially the economic freedom of the individual, trumped all other moral considerations. Setting people free from the state, setting people free to pursue their individual economic interests, this was her guiding idea. And so she took a sledgehammer to all those patterns of community living that held the individual back. To express her mistake philosophically, she confused ‘freedom from’ (any external constrains) with ‘freedom to’ (something that requires a whole social architecture of discipline and solidarity to enable people to flourish and live out their fullest lives).

Suggested reading

Labour needs a moral revival

By Giles Fraser

Get “on your bike” was the message of one of her fiercest lieutenants to those whose communities had been trashed. Freedom of movement and freedom of capital, deregulated markets and the privatisation of public services – with all these, the world was transformed. Under the influence of people such as Keith Joseph and the free market philosophies of Friedrich Hayek, social problems were all imagined to have market solutions.

But far from setting ordinary people free, this turned into a revolution for financial opportunists feasting on the corpse of traditional manufacturing and the way of life it sustained. By destroying the power of the Trade Unions, Thatcher paved the way for the reign of the money men from the City. Very little was conserved. That is why Mrs Thatcher should be considered a cuckoo in the nest of traditional conservatism.

It is from these two perspectives that I consider the long slow death of the Labour Party. What changed Labour was Tony Blair. Blair conceded the Thatcher victory and set out re-inventing the Labour Party as a faintly progressive version of liberal ideals, not challenging the liberalisation of financial markets one bit, but simply adding a top-dressing of social liberalism to disguise the overall concession of defeat.

Then, in 1995, Blair got rid of Clause 4 from the Labour Party’s constitution. It read: “To secure for the workers … the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange.” At the price of ditching socialism, Blair established an electorally powerful, but intrinsically unstable, alliance between traditional Labour supporters and a newly empowered liberal middle class. The big tent.

Suggested reading

Our modern parenting is making monsters

By Giles Fraser

There are those who will argue the Labour Party had no choice. Its traditional power bases had been so weakened by the Thatcher revolution that it had to find new ways of drawing upon a wider constituency of support. Others, like me, think he sold the pass. And so the Labour party became an uneasy coalition of professional metropolitan liberals, media professionals, techies, academics, journalists; and socialists who looked back to a political philosophy embedded in the factory and more traditional patterns of communal life.

The IT revolution of the 1990’s further entrenched the power of liberalism. ‘Freedom from’ went digital. For those who grew up with this new technology, socialism transformed itself out of all recognition into a philosophy of individual empowerment: a refusal of any expression of heteronomous power, a commitment to the freedom of the individual to self-define. Yes, this is a generalisation. But it contains a basic truth. These new liberal individualists may have railed against the neo-liberal economics of the US right, for example, but they were more than cousins – both expressions of the same ideal: that the I has moral priority over the we.

Brexit has blown apart this coalition. In the recent European elections, former manufacturing towns like Wigan, Doncaster and Dudley voted 44.6% for the Brexit Party and 14% for Labour. By sharp contrast, university towns like Cambridge, Nottingham and Manchester split the other way, 27% for the Lib Dems and 21% for Labour. And this is why the Labour Party is falling apart.

Suggested reading

Will our Brexit conflict ever be resolved?

By Giles Fraser

Traditional Clause 4 Labour Party members – Benn, Skinner, Corbyn and so on – have long despised the European Union as just another expression of free market hegemony, a means of allowing big business and financial power to free itself from the limitations placed upon it by the power of the state.

For Clause 4 socialists like me, the debate over Europe is a question of who is to be master: the state, with its democratic justification and ability to redistribute wealth, or international finance, a force that is always trying to rid itself of state control and the power of the state, under democratic mandate, to impose taxation.

The ‘free’ bit in free markets and free movement is the freedom to evade taxation. Businesses like Amazon want ‘free’ because it allows them to transfer their profits to parts of the world where they are not taxed. It allows them to make stuff or employ people where labour is cheap – or even better to get cheap labour “on your bike” style to turn up where it suits them – and then to transfer the profits to low tax regimes, and thence to offshore accounts.

These forces are unthreatened by social liberalism and are happy to encourage it. California hi-tech capitalism is as woke as you like because social liberalism doesn’t challenge the basic financial plumbing of the free market.

The best argument for the EU is that only something as big as the EU is powerful enough to take on such interests. The argument against is that the EU facilitates them, that the EU is a Davos run business club that, by weakening the democratic mandate held by nation-states, allows international finance an increasingly unrestricted playing field. Look at how the EU dealt with Greece and its debt crisis. No thank you.

Suggested reading

Remainers' immigration hypocrisy

By Giles Fraser

The problem for Labour is that it now looks in two directions and it cannot make up its mind. Liberals face in one direction and Clause 4 socialists in another. The transfer of votes from Labour to the Liberal Democrats during the European Elections – including that of Alastair Campbell – demonstrates the natural affinity of new Labour with liberalism. The story of 20th and 21st Century politics is usually written up as the death of the liberal party after WW1. In 1935, George Dangerfield wrote the highly influential The Strange Death of Liberal England. But he read the rites far too early. Liberalism has decisively shaped both the Conservative and Labour parties. It became the enabling philosophy of late capitalism. And it gradually hollowed-out and replaced the original philosophies of the two great parties of the 20th Century: the conservatism of Conservatives and the socialism of Labour.

The tragedy of the present moment is that no mainstream political party has developed a robust and popular enough political philosophy to resist the forces of a globalised and unfettered market.

If fascism is the only answer, then I will side with the liberals every day. For there can be no concession to the hateful politics of the hard Right. But there has to be another way, a philosophy that resists fascism but also resists the power of liberalised globalised capital. One that respects the more conservative instincts of community preservation. One that understands that the family is the most successful delivery mechanism of care for the vulnerable. And one that appreciates that there will be no space for something as wonderful as the National Health Service if there is no positive and underlying philosophy of the nation state to bolster it. Likewise nationalised industries and utilities.

Suggested reading

Why won't Remainers talk about family?

By Giles Fraser

In the name of the wrong sort of freedom, the liberal Left in England gave up on the nation as a philosophy for bigots and racists. In Scotland, always more comfortable with its own national pride, Labour was wiped away by an avowedly nationalist party: the Scottish Nationalist Party. And similarly, in Wales.

But in England the nation state was abandoned by the liberal internationalist Left. They twitched and tittered though ‘God save the Queen’, not understanding that this was the true anthem of the big tent, the nation being that imaginative space where otherwise diverse people might find common cause and mutual solidarity.

Brexit didn’t break us apart. Thatcher broke us long before that. Brexit is simply a mirror to our brokenness. And if we are to find unity again, we need a moral revival of the Left. It must bring back Clause 4. And it must learn to stand up straight when it sings the national anthem.

Unlike most of the people who name-drop the book, or attempt to ridicule what they believe to be its thesis, I read it closely many years ago and am still in awe of its achievement. Not least because it has that hallmark of a great book: parts of it strike you at unusual moments.

Such a moment occurred when I noticed the latest philosophical musings of Teen Vogue last week.

Teen Vogue is a fascinating window onto the confusions of our time. Even the greatest fans of Vogue know it is not the place to go for in-depth analysis on political or fiscal issues. You’d think the teen version would be an even less suitable venue for considering the historical dialectic. But once again John O’Sullivan’s famous law (that any institution or enterprise that is not explicitly Right-wing will become Left-wing over time) is being vindicated.

Further reading

Fukuyama's blinkered view of history

By Douglas Murray

You might imagine Teen Vogue to be as aspirational as its parent-brand and so betray some sympathy for the free market. But, in fact, it is less about living the free market lifestyle, than promoting the oligarchical levels of wealth necessary to live a life of the kind portrayed in its pages. And it appears that such oligarchical aspirationalism can now sit comfortably alongside ‘luxury’ socialism and communism.

In July this year, the publication ran a fluffy, admiring interview with self-styled “literally a communist” Ash Sarkar. Teen Vogue seemed intent on elevating Sarkar as a role model for their readership, putting the “cool” back into communism, and the “glam” into gulag. This wasn’t, however, a one-off and not simply the result of everyone but one communist-chic intern being out of the office that day.

Even earlier this year, in April, Teen Vogue published an article headlined “What ‘Capitalism’ Is And How It Affects People“. It was an explicitly anti-capitalist piece written by a campaigning anti-capitalist called Kim Kelly. On social media, the publication promoted this piece under the heading “Everything you need to know about capitalism”. A surprising claim, and – some might say – presumptuous. After all, is it really possible to write everything that people might need to know about capitalism in one article? And if so would the likely source of such an article really be Teen Vogue?

Further reading

'Nazi hunts' are a sign of our hyperventilating times

By Douglas Murray

In recent days, the publication has once again brought itself to the notice of people who would not otherwise normally investigate the political stances of Vogue world. Last week, Teen Vogue’s Twitter account re-published its April article – so important they obviously believed it to be. They did so with the teaser: “Can’t end poverty without ending capitalism!”

Can't #endpoverty without ending capitalism! https://t.co/LyMvhM1HkJ

— Teen Vogue (@TeenVogue) October 17, 2018

Fortunately, Twitter was also on hand to point out that rather than being the cause of poverty (and the eradication of capitalism therefore being a good thing), capitalism has in fact lifted more people out of poverty – and faster – than at any other time in human history.

https://twitter.com/ne0liberal/status/1052660248987795458

Perhaps Teen Vogue felt a smidgen of self-awareness, for they re-tweeted a message from the author of their April capitalism piece. Clearly stung by the widespread use of facts to counter her original thesis, Kelly simply tweeted:

Good morning, capitalism is still bad

— Kim Kelly (@GrimKim) October 18, 2018

Which Teen Vogue thought worth sending out to their 3.4 million followers.

Many people will be baffled. They will wonder how any publication or individual could be so lacking in cognitive skills that it would repeatedly wallow in all the conveniences of capitalism (and promoting, it must be said, some of its worst aspects) while also lobbying for that system’s destruction.

Which brings me back to Fukuyama. At the conclusion of The End Of History, the author mused on the likely behaviour of the people who find themselves at the end of the historical process as delineated by Hegel and himself. Fukuyama posits, among other things, that some people may become enraged at the end stages of the historical synthesis because they will have too little to struggle against.

As a result they may struggle “against the just cause”, and “struggle for the sake of struggle”. Fukuyama warned that in this situation, “if the greater part of the world in which they live is characterized by peaceful and prosperous liberal democracy, then they will struggle against that peace and prosperity, and against democracy”[1. The End of History and the Last Man, Francis Fukuyama, 2012, p.330].

Further reading

CLR James rejected the posturing of identity politics

By Ralph Leonard

Anyone doubting that there are people currently in the position of Fukuyama’s “last man” would do well to study Teen Vogue – a publication which struggles out of habit amid the only system on earth which could ever allow such a publication to exist.

A publication which can promote the most extreme covetousness of luxury lifestyles and goods, while simultaneously advocating the end of capitalism raises many questions. Some of them must be counted above Vogue’s paygrade. Such as the question of how post-free market economies are meant to be run. But perhaps the questions could also be posed at a more local level. Such as, how exactly are people to buy luxury handbags in the post-capitalist world?

Across Europe and the rest of the world, others are watching, wondering which path the UK will take, knowing that the outcome could be of genuinely historic importance. Yet this battle of ideas has nothing to do with the UK leaving the European Union. It’s far more important than that.

The British political and media classes remain obsessed, of course, with every twist and turn of the Brexit process. That’s understandable. Still fractious negotiations over UK-EU “regulatory alignment” and other seemingly arcane concepts may see Theresa May ousted as Prime Minister. Various Parliamentary shenanigans could yet upend the Brexit vote altogether.

Having just endured the party conference season, though, it’s clear to me that, beyond the headlines, an even more profound debate is gaining momentum, with much greater potential impact on the long-term living standards of millions of workers across the UK and beyond. It’s of relevance to the vast majority of countries on earth, in fact, for it’s a debate about the future of capitalism itself.

Further reading

What's killing the Conservatives?

By James Kirkup

“People feel that the old way of running things isn’t working,” declared Jeremy Corbyn during his conference speech, addressing the party faithful in Liverpool. As the Labour leader knows, support for capitalism across the UK is on the wane. Ten years on from the financial collapse, amid countless corporate scandals and spiralling wealth inequality, there is a growing sense among many that ‘the system’ is rigged against them.

A recent YouGov poll suggested around 60% of voters think the railways and Royal Mail should be renationalised. Over half want the water and energy companies back in public sector ownership. A ComRes survey earlier this year showed that young British adults now think capitalism is more dangerous than communism.

No matter that the Soviet Union collapsed under the weight of its economic contradictions. Or that, since the late-80s fall of the Berlin Wall, the spread of capitalism has enriched billions – with the share of the global population in extreme poverty plunging from two-fifths in 1990 to under one tenth today.

The reality for many is that, across the West, stagnant wages and spiralling corporate profits are fuelling a sense that capitalism is now skewed, with the benefits accruing to an elite few at the expense of the many. And that’s allowing Corbyn to present, with some success, his programme of aggressive renationalisation, sweeping trade union powers and highly punitive taxation as “the new common sense of our time”.

Further reading

Could Mill's model mend capitalism?

By Victoria Bateman

At the Tory party conference in Birmingham, during numerous conversations with ministers and other senior Parliamentarians, I came across two distinct groups, separated by how they thought their party should respond to Corbyn.

The first group emphasised the need for a combination of negative campaigning and reminders that capitalism is the best system we have. They argued that the Tories should keep repeating that Labour always runs out of other people’s money, while stressing that Corbyn has, in the past, shown bad judgement in fostering links to various terrorist leaders and crackpot regimes.

Above all, though, this first ‘it ain’t broke’ group of Tories maintain that there is no need to apologise for capitalism, because it works. This was a phrase I heard repeatedly, from a wide variety of senior Conservatives in Birmingham.

The second group of Tories, in contrast, understand there is a serious problem and that Corbyn, for all his clear faults, is asking the right questions. Their response is to acknowledge that ‘the system’ does need serious reform – and such reform is vital to prevent a Corbyn-driven onslaught of far more statist, counter-productive, anti-capitalist policies.

Further reading

From Jeremy Corbyn to Bernie Sanders to Elizabeth Warren; what the Left is getting right

By Liam Halligan

From telecoms to energy, from banking to house building, this ‘let’s fix it’ group of Conservatives argue that UK industries have become increasingly concentrated – and that’s resulting in bad outcomes for consumers, including less choice, poorer service, ‘super-normal’ profits, under-investment and high prices. That capitalism does face a legitimate crisis of confidence.

This is by no means the official Conservative party view. I heard very little along these lines from the platform in the main hall in Birmingham. Yet, at numerous fringe meetings, listening to some of the party’s most interesting thinkers, it was a recurring theme that’s showing signs of punching through.

Perhaps the most prescient fringe speech I heard in Birmingham was from John Penrose, a Conservative MP since 2005 and, before that, a successful businessman. He recently published an interesting paper that deserves attention – ‘A Shining City Upon a Hill: Rebooting Capitalism’.

Penrose opens his argument by asserting that “every so often, capitalism goes wrong”. It’s an obvious, but extremely important point. Delving back into history, Penrose explains how “waves of bank failures in the early days of the Industrial Revolution resulted in the pivotal Bank Charter Act”. He reminds us that “exploitatively-poor working conditions led to progressively more effective Factories Acts, beginning a long process of improving safety and equity for employees which continues to this day”.

Further reading

How to future-proof the economy: tax all income equally

By John Penrose

Referring to a later era when capitalism was in crisis, Penrose recalls that “the Great Depression which followed the [1929] Wall Street Crash gave birth to modern competition laws, to protect customers from being exploited by over-mighty companies who abused their power”.

All these changes took place not because capitalism should be scrapped in favour of a far more dirigiste system of socialism or even communism, but because it was imperative that the system was modified in order to regain the broad public consent on which it is built, and ultimately to ensure its survival.

“Each of these moments happened because capitalism had started to behave in ways which seemed immoral,” argues Penrose. “Creating wealth is wonderful, but not at any cost and the tariff in human health or dignity had become too high”.

“So each time, the system had to change,” Penrose continues. “Society demanded new laws to shape and frame free markets so they still drove vigorous economic growth, but humanely and without exploiting the weak and vulnerable … capitalism was updated, modernised and rebooted”.

The status quo benefits a lot of us, but for many more – perhaps even the majority – capitalism isn’t working as it should. “People are casting around for answers about how it should change,” says Penrose. “But in times of trouble we turn to what we already believe, and the discussion about what those alternatives might be has got stuck in a formulaic and repetitive, backwards-looking debate about the failed and stale options of the past”.

Further reading

Ten vested interests the Tories failed to tackle

By Peter Franklin

I think that’s exactly right. The Tory party is largely run at the moment by the ‘it ain’t broke, don’t apologise’ crowd who say capitalism is fine as it is. They believe Corbyn can be countered by full-bloodied appeals to free enterprise, references to his support for Venezuela and reminders of the 1976 ‘cap in hand’ crisis – when the UK under a Labour government had to be bailed out by the International Monetary Fund.

But many of the voters the Tories need to attract – young couples struggling to make ends meet, graduate professionals with no chance of buying a house – weren’t alive in 1976. To them, assertions from wealthy ministers that ‘capitalism is the key to prosperity’ sound offensive. Talk that ‘Labour always wrecks the economy’ or that Corbyn ‘placated the IRA’ fall on deaf ears.

“To its credit, the political left has realised there’s a problem – yet has retreated into comfortingly-familiar arguments about why capitalism itself is fatally flawed, to which the only solution is socialism, state ownership and renationalisation,” observes Penrose.

“But the political right has followed them, refighting the intellectual battles of the 1970s and 80s by explaining why the left’s answers are wrong, but without offering a modern, attractive and fair alternative vision instead”.

Eschewing ‘it ain’t broke’ for ‘let’s fix it’, Penrose lays out a series of ideas to tackle genuine problems – “housing that is far too expensive … energy firms that rip-off loyal customers … water firms that don’t fix leaky pipes but still impose hosepipe bans … broadband that works slower than it’s supposed to”.

Further reading

How to tackle the poverty premium? Let's start by breaking the oligopolies

By Charlotte Pickles

He observes that the UK’s last Competition Act – a sweeping round of anti-trust legislation to promote customer-friendly competition – was in 1998, before Facebook and Google existed. “We are still using analogue competition rules in a digital age,” he says. “A new Competition Act is urgently needed”.

It’s true, as Penrose says, that “Britain’s economy has become more concentrated, with big companies getting bigger – which gives them more power to charge higher prices, or lower quality, or pay their staff less, or all three at once”.  It’s also true that, despite the UK’s stellar gig economy employment figures, that “for some lower-skilled workers (but not all, and not higher-skilled ones) zero-hours contracts feel like exploitation”.

Free markets don’t amount to the ‘law of the jungle’ as some anti-capitalists like to suggest. They are political and cultural constructs – and, every now and then, the rules need to be overhauled to tip the balance of power away from an over-bearing, all-powerful corporate lobby and back towards such consumers. Penrose believes that now is such a time.

So does Jesse Norman, the Hereford MP who recently wrote a biography of Adam Smith. Rightfully seen as an architect of capitalism, Smith is as misinterpreted by his acolytes on the neo-liberal Right as he is by detractors on the Left. Often associated with untrammelled free markets, the reality is more nuanced.

Further reading

How Corbyn captured the middle class

By James Bloodworth

Writing as the Industrial Revolution dawned, Smith understood that, while capitalism could generate wealth for business owners, it would work only for the broader population, and maintain public support, if certain conditions were met. Some 226 years after Smith died, we need to heed his words – for UK capitalism, in its increasingly cronyist guise, is doing the public a disservice.

Speaking on the fringe at Birmingham, in a packed auditorium, Norman said exactly that. “The best thing you can do in the context of crony capitalism is practice honest government,” he said. “You can’t let government be pulled around by vested interests”.

Norman denounced the ‘it ain’t broke’ group of Tories. “The empty rhetoric of free markets is one thing – what we really need is genuine competition, recognising that many rising profitability and mark ups reflect the reality that some businesses have become too powerful”.

When describing the government’s housing policy, Norman – despite being on the ministerial pay-roll, shows admirable intellectual independence. “It isn’t working because of artificially inflated demand,” he said in Birmingham, calling out “Help to Buy” as counter-productive.

And the day after the government said it would tax wealthy overseas buyers using UK property as an investment bolt-hole, Norman countered that ministers should be focussing their efforts on bringing large UK developers to heal, by tackling building delays designed to retain scarcity and keep prices and profitability artificially high. “The government seems to be going after oligarchic investment in housing,” remarked Norman. “I think it should go after oligarchic supply”.

Further reading

Home Truths – Part III: The nine drivers of a broken market

By Liam Halligan

Brexit will clearly dominate British political discourse for months and even years to come. Yet, the reality is that only 8% of UK firms sell goods and services to the EU, our total exports to the bloc currently account for only a tenth of GDP. If Brexit results in slight changes in our EU trade arrangements, that’s unlikely to have a massive long-term economic impact. I’ve long maintained that any negative fall-out will anyway ultimately be outweighed by rising UK trade with the four-fifths of the world economy beyond the EU – including all the fast-growing emerging giants of the East.

UK capitalism, however, is now on trial and preserving it will take action, not a simple dismissal of the concerns of a new generation with an assertion that “socialism doesn’t work”. Ministers must display the grit needed to face down vested interests, rein-in excess and make sure punters don’t feel constantly ripped off.

I’m generally a business-friendly commentator who believes in low taxes and a small state. Yet I’d credit the Left with some of the best, most courageous and clear-sighted policy analysis right now – such as the recent report of think tank IPPR’s Commission on Economic Justice – even if the proposed solutions sometimes make me balk.

Big companies across the Western world have become far too powerful. Our political, business and media elites are much too intertwined. Such cosy relationships have resulted in an enfeebled competition policy, which is further increasing the might of a small number of corporations, to the detriment of consumers, smaller firms and broader society.

The Tories need to understand such views are increasingly finding favour with a broad swathe of the electorate – invoking the kind of bold anti-trust measures that America reached for in the late nineteenth and early twentieth century.

Such measures are essentially pro-market – because they free up competition and make capitalism work properly. That’s a reality Tory high command needs to grasp.

At its apogee, when it dominated the politics of United States, the UK, and Germany, it was thought to provide a stable template for governance well into the new century. Confidence ran high that the business cycle had been tamed and that the forces of globalisation and technology could be managed for the good of average citizens as well as meritocratic elites.

It was very much a product of its time; it arose in response to the wave that brought conservative governments to power throughout much of the West, beginning with Margaret Thatcher in the UK, followed in quick succession by Ronald Reagan in the United States and Helmut Kohl in what was then West Germany. Politicians and thinkers on the centre-Left were forced to reassess the apparent exhaustion of European social democracy and its American cousin, the New Deal.

Enhancing social security and curbing inequality were major achievements, to be sure. But the political architecture of the non-communist Left, forged in the class struggles of the industrial era, appeared increasingly outdated in the closing years of the 20th century. The focus of market economies was beginning to shift away from manufacturing toward services, finance, and knowledge-intensive productive processes.

A class of educated professionals with non-traditional views on gender, culture, the environment and much else was emerging. Old expectations about job security were giving way to new realities of constant change. If the centre-Left failed to respond to the new economic and class structures, it risked irrelevance.

Further reading

Can social democracy survive?

By Matthew Goodwin

The task of reconstructing the centre-Left began in the United States. After the Democratic Party had lost its third consecutive presidential election in 1988, a small band of Democratic dissidents (myself included) undertook to modernise their party, succeeding just four years later with the election of ‘New Democrat’ Bill Clinton. This achievement attracted global attention from supporters of the centre-Left. As a White House official during Clinton’s first term, I can attest to the fact that representatives of Tony Blair’s New Labour movement were in the building from Day One, taking notes.

The final link in the chain was forged when Blair, who had by then become prime minister, and Germany’s newly installed SPD chancellor, Gerhard Schroeder, issued a joint manifesto, Europe: The Third Way/Die Neue Mitte, which crisply articulates the movement’s main themes. “Most people have long since abandoned the world view represented by the dogmas of Left and Right,” it began. “Social democrats must be able to speak to these people.”

Overall, the document declared, the old version of social democracy overstated the weaknesses of markets and undervalued the importance of individual and business enterprise to the creation of wealth. It assumed that public expenditure as a share of national income could rise indefinitely. It assumed that government could row the boat, not just steer it, and that public programmes could be effective as they proliferated without coordination or consolidation. And it assumed that the economy and polity would remain strong as family and community ties weakened.

Further reading

Why won't our spineless politicians stand up for the family?

By Paul Embery

Although the values of social democracy are timeless, the document continued, its policies must be modernised in response to changing circumstances. This means revising social democrats’ long-held beliefs about the relationship between the market and the state: “government does all it can to support enterprise but never believes it is a substitute for enterprise”.

It means distinguishing between social justice and equality of outcomes: the latter entailed “a neglect of the importance of rewarding effort and responsibility”, burdening work with “ever higher costs”, and failing to celebrate creativity and excellence. It means questioning the relationship between social justice and “ever higher levels of public spending”, which can negatively affect competitiveness, job creation, and living standards.

It means righting the imbalance between rights, which have proliferated, and responsibilities, which have withered. It means limiting state regulations designed to address market failures, because “universal social safeguards can exact an excessive toll on entrepreneurship, individual responsibility, and community spirit.

Further reading

The centre-left will never defeat European populism if it fails to first understand it

By Henry Olsen

In retrospect, it is clear that the Third Way rested on optimistic assumptions about the new world we had entered. We assumed that the fall of the Berlin Wall and collapse of the Soviet Union represented that triumph of democracy, which had become (as the cliché ran) “the only game in town”. We assumed that unipolar American power would spread a protective canopy over a global order of free governments and free markets.

We took for granted the “Washington consensus” that prudent fiscal policies, deregulation, and markets open to trade and capital flows would accelerate the entrance of developing countries into this order. And we believed that China could be peacefully integrated into a system of rules that the United States and other market democracies had created.

Our assumptions about the domestic sphere were equally optimistic. We were confident that globalisation and technological change would be compatible with vigorous, broad-based economic growth; that government could manage the transition to the knowledge economy and reduce the amplitude of economic cycles; and that the fruits of suitably managed markets would allow us to come together across class, ethnic, and geographical lines, ease racial tensions, and promote social inclusion, increasing diversity.

Further reading

Jeremy Corbyn is right: a 'post-neoliberal world order' is coming (whatever that means)

By Peter Franklin

Needless to say, our hopes were not realised. History did not end as, in 1992, Francis Fukuyama assured us it would; after a brief slumber, it returned with a vengeance, bringing with it a resurgence of nationalism, populism, and alternatives to liberal democracy. Russia regressed to autocracy; radical Islamism went to war against the West; China became far more prosperous without becoming a whit more democratic, confuting decades of modernisation theories.

Developments at home were no less disappointing. Market forces and new network effects combined to produce rising economic concentration, declining entrepreneurship. After a brief burst of shared prosperity in the late 1990s, growth slowed while inequality surged. The financial crisis and ensuing Great Recession showed that the managers of the economy were not really in control and that the vaunted Great Moderation was an illusion.

Further reading

The truth about 'liberal' London

By Paul Embery

The economic and cultural gap between highly educated, densely populated metropolitan areas and the more homogeneous, less educated hinterlands of small towns and rural areas widened, with fateful consequences for politics throughout the democratic West. The ideal of equal opportunity curdled into a new meritocracy that threatened to become self-perpetuating. And citizens went into open revolt against the free flow of peoples across borders embraced by the European Union and US progressives.

In country after country, Third Way reformers found that the culture of rights was more than strong enough to impede the birth of a new culture of responsibility: families and communities continued to weaken, and programmatic efforts to create an ethos of service fell short. Presented with President Clinton’s programme of paid national and community service, the Left wanted funds without individual responsibility, while the Right wanted responsibility without funds.

The Third Way principle of reciprocity proved strong enough to launch the programme, but too weak to take it to the scale needed to transform a hyper-individualist culture.

Further reading

The rise of post-truth liberalism

By John Gray

In the face of so many confuted assumptions and dashed hopes, it is tempting to conclude that little of the Third Way is relevant to our current circumstances. This proposition is over-broad, I think, because history has not overtaken all Third Way premises.

Globalisation, rapid technological change, and the knowledge-based economy are here to stay. Suitably regulated markets create wealth while mitigating social and economic disruption. Government works best when it steers rather than rows, coordinates rather than fragmenting its programmes, and weighs the costs of regulations against their benefits. Vigorous economies and sturdy democracies depend on strong families, vibrant communities, and a reciprocal balance between rights and responsibilities.

When we move from principles to policies, however, the obsolescence of the Third Way is harder to deny. Its inability to foresee or adapt to the economic and political changes which were arguably created by its dominance at the end of the century has, for the time being, pushed its ideas and leaders to the curb. The Third Way’s programme of incremental adjustments to social democracy within a framework of optimism about globalisation, democratisation, and demographic diversity can do little to address today’s much deeper structural problems.

Further reading

Who whacked Jensen Huang?

By James Bloodworth

New circumstances require new policies.

To stem rising economic inequality and geographical divergence, we will need more government intervention and regulation than the creators of the Third Way contemplated, along with much greater investment in the fundamentals of equal opportunity. To sustain a rules-based international order, the rules must pay less attention to economic aggregates – and more to sectors, regions, and economic classes – than the proponents of the WTO imagined. To be sustainable, immigration regimes will have to pay more attention to the economic and cultural effects of entrenched practices. What works in San Francisco will not necessary work in Scranton; the Midlands may reject what London cherishes.

In the international domain, the decision to allow China to enter the World Trade Organisation without committing to the practices of a market economy has produced distortions that the West must address – but from a far weaker position than it enjoyed two decades ago. We need a grand coalition of market democracies to persuade China’s leaders that its current course is unsustainable and that abiding by the spirit as well as the letter of the global trading system is their best strategy for the long-term.

Drafting his Annual Message to Congress just weeks before signing the Emancipation Proclamation, President Abraham Lincoln was in a reflective mood. “The dogmas of the quiet past are inadequate to the stormy present,” he wrote. “As our case is new, so we must think anew, and act anew. We must disenthrall ourselves.” And so we must today.

Further reading

Is America a failed state? Or is liberalism a failed ideology?

By Peter Franklin

I have no idea and frankly I’m not really interested. Nor, if they had any sense, would Conservatives at their conference in Birmingham worry much about these things. They have even bigger problems to worry about.

Never mind a plan for Brexit, the Tories are painfully short of ideas for Britain. The failure of Conservatives, Leavers and Remainers alike, to see beyond European questions and think properly about the sort of economy, society and state Britain will have in the next decade is a far greater threat to the party than a botched Brexit or Jeremy Corbyn.

The continued success of the Corbyn Labour project still leaves some Conservatives baffled and scared. Why can’t voters see that the professed socialism on offer in Liverpool this past week would doom the UK economy? Why don’t they understand that a market economy (where goods, services and labour are traded at prices decided by buyers and sellers and the means of production is mostly in private hands, its ownership protected in law) is the best way to deliver more wealth and happiness?

Further reading

Politicians are in hock to big business – and consumers are paying the price

By James Kirkup

If there’s one thing the Conservatives should want to conserve right now, it’s that economic settlement. But they’re failing to do that because they’ve forgotten their history. That history starts with Edmund Burke, who said that a state without the means of some change is without the means of its conservation. Sometimes preserving something means changing it.

That’s certainly the case for the UK’s market economy, which just isn’t working properly for a lot of the people in it. If you want to preserve markets, you have to make them work better. Sermons about the evils of socialism and the glories of capitalism are meaningless to most voters, who are more likely to be worried about how far their wages stretch each month and the persistent sense that the businesses which sell them things are out to rip them off.

A pragmatic Conservative Party would consider those views – and the feelings that led 52% of the electorate to put two fingers up to the entire British political and economic settlement – and conclude that old arguments about free markets and shrinking the state aren’t going to generate or sustain the policies Britain will need in the years after we leave the EU.

Yet instead of remembering their pragmatic heritage, some Conservatives seem intent on (mis)remembering Margaret Thatcher, whose libertarian tendencies were not entirely Conservative, and have in any case been exaggerated by some of her later devotees.

Further reading

Capitalists – not socialists – are killing capitalism

By Victoria Bateman

Devotion to a caricatured Thatcherite doctrine leads to some almost comical misreadings of the contemporary political scene.

More than two years on from the EU referendum vote, there are still Conservatives intent on constructing the Leave vote as a demand for deregulation and the dismantlement of social and economic protections. The disconnect between ‘Singapore’ Brexiteers in London and Sunderland Leavers has always been striking, but has never jarred more than in reports that Sajid Javid is arguing in Cabinet that a no-deal Brexit should be followed by the suspension of employment rights and the auto-enrolment rules that have given three million people their first private pension savings.

Really, Home Secretary? Do you really believe that 17.4 million people voted for a longer working week, voted to make it easier for their boss to fire them and to stop paying into their pension? The fact that such an agenda is (plausibly) seen as part of potential leadership pitch speaks volumes about how far some Conservatives need to travel to start engaging with the interests of the people they aspire to represent.

Further reading

Can we reform our rancid political debate?

By Douglas Murray

Some Conservatives insist that their party must reject the option of offering ‘Corbyn Lite’ positions on the economy. Yet that fails to differentiate between diagnosis and prescription. It’s possible to see merit in the Corbyn analysis of markets without endorsing the remedies he proposes. Indeed, I’d argue that enduring support for the Corbyn Labour Party makes it all the more important for Tories to offer their own answers to the questions he asks.

The Labour leader does have a point about the state of markets in the UK. They don’t work well for everyone in them, because not everyone behaves in the way today’s free marketeers imagine they do.

‘Loyalty penalties’ are a case in point. Customers who stick with their energy firm, their broadband supplier or their mortgage lender are almost certain to be paying more than they should. Many don’t even know it: millions have been paying for mobile phone handsets they already own. Citizens Advice reckon some people are paying almost £1,000 a year too much for their loyalty.

‘Poverty premiums’ also defy free-market orthodoxy and produce unfair outcomes that undermine faith in markets. In a perfect market, low-income consumers would generally pay less for things, as suppliers cut their prices to ensure their products were affordable. But in our imperfect markets for essentials like energy, the poor pay higher prices than the rich – for exactly the same product.

Markets aren’t working. Loyal penalties and poverty premiums prove it. That doesn’t mean that the only or indeed correct response is to do away with those markets and replace them with control by the state or politicians: as regulators have candidly told ministers, fixing prices rarely ends well for anyone. The Conservatives need better answers to these failures.

Further reading

How to tackle the poverty premium? Let's start by breaking the oligopolies

By Charlotte Pickles

Part of a better answer is surely in more assertive regulators; give economic referees the legal, financial and political support they need to ensure fair play and let them take real action on incomprehensible contracts and Byzantine pricing structures.

Empowering consumers is also essential. Giving households proper ownership of the hoards of valuable data companies hold about them and their spending patterns would allow customers to really navigate the market and secure better deals.

The ultimate answer however is simply to deliver more competition in markets, by intervening more if necessary. Reluctance to do so arises from the common Conservative error of confusing support for business with support for markets. Competition makes businesses work harder and erodes profit margins, so why should business want more of it?

Peter Thiel, the billionaire founder of PayPal, argues that the dream for any business is become a monopoly that can exclude potential rivals. “Competition is for losers”, he says.

Warren Buffett has become the world’s richest investor by only putting money into a company if it has a ‘moat’, meaning enough dominance of its market to protect it against competitive challenge by rivals. Lack of competition is good for owners but not for customers or workers.

Firms that don’t have to fight for business can offer poor service and high prices. They can also skimp on the investment that makes their business (and workers) more productive. And driving up productivity is the only real way to drive up wages and start to answer those questions Corbyn asks.

Conservatives, so quick to warn against the problems of state monopoly, should be much keener to tackle the concentration of economic power in private hands: too many British consumer markets are dominated by a handful of big incumbents. Tories should support the challengers who would disrupt that dominance and deliver better for consumers.

Further reading

Corporate fat cats are abusing their power

By Michael Jacobs

The fact that markets aren’t perfect is just one thing Tories have failed to learn from Corbyn and his party. Another is that organisation matters. Ultimately Corbyn doesn’t dominate Labour by philosophy or charisma. He rules by numbers. By bringing in at least 250,000 new members – his own people – he changed his party and remade it in his own image, just as Tony Blair did after 1994. And the 2017 general election campaign proves that even in the digital era, old-fashioned party machinery, built on members, still matters.

Where is the Conservative movement to match the Labour organisation that was on display in Liverpool this week? Birmingham will once again demonstrate that the Tory faithful are a small, old, rich and southern congregation. Anyone opening the CCHQ parcel containing their conference pass was first confronted with a leaflet exhorting them to leave the party money in their will. The Tories know their membership is dying but seem more interested in profiting from that decline than addressing it.

David Cameron’s scorn for the Tory grassroots was almost Freudian, but May’s failure to recruit new ground troops is a curious failure from a party leader who has spent much time among the voluntary party. Even more striking is that none of her would-be successors talks much about building a mass-membership party.

Equally curious is the party’s apparent indifference to new ideas. Many younger Tories keen to make a name for themselves are playing safe by avoiding anything that looks like “the vision thing”. Bolder thinkers – George Freeman, Nick Boles – struggle to find traction among colleagues addled by Brexit.

Meanwhile, Jesse Norman’s recent book about Adam Smith would have provoked a more thoughtful party into a full-scale re-evaluation of its history, purpose and – most of all – its view of markets and the people in them. Norman demonstrates that the idea of Smith (and thus, the market) that many Tories hold is shallow and wrong; far from championing amoral laissez-faire “neoliberalism”, Smith saw people as moral beings, and markets as imperfect and prone to capture. Both require a different, more active role for the state than the one advocated by many Tories today. Norman discreetly avoids saying it explicitly, but it is the Tory failure to accept this reality that makes Corbyn’s job that much easier.

Further reading

Five ways Theresa May could have played things differently

By James Kirkup

A Conservative Party willing to think boldly would put Norman on the main stage in Birmingham and give him a job imagining the political economy of Brexit Britain. Instead he gets to look after bypasses as roads minister, and to discuss his book at fringe events with non-Tories like me. (8.30am on Monday in the Hyatt, if you’re up early.)

Another original Tory thinker is an outcast. Nick Timothy, author of last year’s “consciously Burkean” manifesto, remains exiled, even though many of that document’s ideas – “fair” markets; real corporate governance reform; a proper rebalancing of higher and further education; the progressive taxation of accrued wealth to fund social care – are exactly what the party now needs to answer Corbynism. (It’s worth noting that a manifesto often accused of lacking retail-friendly offers actually raised issues like the mobile handset rip-off more than a year before Citizens Advice produced its recent influential report on the topic.)

Whether jettisoning Timothy himself was the right thing to do is a question for another day, but ditching his ideas simply because they were his looks increasingly like an act of self-harming folly that left the party blinking in the headlights of Corbyn’s low-emission bandwagon.

Nick isn’t right about everything, of course. On some things, he’s dead wrong, and nowhere more so than on immigration. Tory attitudes to immigration have long baffled me. Shouldn’t a party that celebrates hard work and enterprise embrace people who have got on their proverbial bikes and gone looking for opportunities far from their own homes? Shouldn’t a party that celebrates the idea of British nationhood and patriotism offer an idea of a nation big and strong and confident enough to encompass all-comers, wherever they were born or raised?

At a Social Market Foundation fringe meeting in Liverpool this week, Professor Rob Ford of Manchester University pointed out that both sides of British politics had missed a huge strategic opportunity after 2004 when the UK opened its labour market to hundreds of thousands of industrious easterners. They should have overhauled citizenship requirements and made those new EU members into new Brits, and thus new voters.

Previous waves of immigration have been happily absorbed into the shared idea of the nation that Conservatives say they cherish. Britain is more, not less, British for the fact that some Brits are black or Asian, something that sensible Conservatives know is a fundamentally conservative outcome, an embodiment of Burkean acceptance of preserving by changing.

Further reading

The economic rationalists don't get the immigration debate

By Ben Cobley

What if the Conservatives had rejected the nativism conjured up by a defensive Michael Howard in 2005 and instead sought to put blue rosettes on people who came to Britain to work, to earn for their families, and to advance themselves? What if British Tories had learned from their Canadian cousins how to weave immigration and its advantages into their story?

And if they can’t be bothered to look that far, they could just listen to their own Ruth Davidson when she says, rightly, that her party “should have the confidence to recognise that people from other nations wanting to come to our country is a sign of our success as a vibrant, prosperous culture”.

Sooner or later, Conservatives must walk back from nativism and accept that the widespread movement of people and demographic change are inevitable parts of modern life and modern Britain. Until the Conservative idea of Britain better matches the reality of Britain, they will always struggle to capture what Disraeli called the “spirit of conservation and optimism” they need to win decisively in this century.

Western liberal market democracy, especially in its Anglo-Saxon variety, maintains the illusion of open, competitive markets that generate prosperity for the people, yet it enforces cartels and enriches a new professional class of tech experts and financiers.

State corporations in the East and tech platforms in the West extract rents on account of their hegemonic position. For all their innovation, Silicon Valley and Wall Street are the symbols of a new oligarchy that celebrates greed and practices usury.

The Protestant tradition is often portrayed as the handmaiden of the capitalist system. Lutheranism’s separation of faith from work appears to inform the Protestant work ethic, which seeks material prosperity in this life while hoping for spiritual salvation in the next. Calvinist doctrine seems to take this further by suggesting that wealth is a sign of divine favour whereas poverty reflects sinfulness. Accordingly, the wealthy are predestined for redemption while the poor will receive eternal damnation for their sins.

However, both Luther and Calvin believed everyday work was imbued with spiritual significance. They saw each economic activity as a vocation through which God works to distribute his gifts, including individual talents and other ways of contributing to the common good. Far from merely chasing worldly riches, their Protestantism viewed the earthly economy as embedded in the divine economy, in which the commandment to love God coincided with the commandment to love your neighbour as yourself.

Binding them together is the idea of shared flourishing within the order of creation. This means that well-being has both an economic and an ethical dimension. Conversely, property and profit can contribute to the common good through the creation of value. Enterprise and employment provide people not just with an income but also with meaning – a recognition of their role in the economy and their contribution to society.

At the same time, the Protestant tradition contained the seeds of division between commerce and social morality. Its emphasis on the individual encouraged the idea that, after the Fall, humanity was so depraved as to be incapable of pursuing goodness without divine intervention. So God’s providence was seen as operating through the market to make vice balance vice and produce a simulation of economic harmony. One influential example of this thinking is the book The Fable of the Bees by the exiled Huguenot Bernard Mandeville, with its subtitle “Private vice, publick benefits”.

Within this thinking lay the foundation for Adam Smith’s Calvinist-influenced idea of the “invisible hand”. There is a tension at the heart of Smith’s thought between the exchange of mutual regard or esteem in society (the focus of his Theory of Moral Sentiment) and the exchange of goods and services (the focus in his Wealth of Nations). The tension arises from Smith’s conception of the market as a morally neutral space in which the balance of individual self-interest with other individual self-interest leads to a mutually beneficial outcome.

But the early twentieth-century Anglican historian R.H. Tawney argued that individual interest unchecked by a strong culture of virtue risked turning the sin of greed into an engine of insatiable acquisitiveness – a prophetic warning we would do well to heed.

Protestantism has rich resources to defend the market against excesses. In the past, as today, Protestant practices of virtue in the economy abound. At the time of the Industrial Revolution, Methodism inspired thrift, sobriety, hard work, education and a determination to delay gratification in favour of investment. These Methodist values attracted the working and middle classes, including artisans and entrepreneurs who viewed the Anglican establishment with suspicion and preferred the building of free, democratic self-organisation in small groups or mutual aid societies.

Believing in proper stewardship, Methodists rejected any opposition between rich and poor in favour of a responsible sharing of risks, rewards and resources. This ethical vision inspired many Methodists to set up their own banks and insurance companies. Going back to the late nineteenth century, a network of Methodist hospitals emerged that until today serves the community regardless of colour, class or creed.

Similarly, Quakers have nurtured apprentices and helped them set up their own businesses. Famous Quaker businesses, such as Barclays and Lloyds banks, Clarks shoes and Bryant & May matches, have a proud history of caring about their employees and establishing new schemes for housing, health and education.

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But their ethical record has been tainted by recent scandals, as with Barclays’ involvement in manipulating the inter-bank lending rate Libor or Lloyds mis-selling of payment protection insurance. Such scandals suggest a hollowing out of their ethos, turning these businesses from being a force for social good founded upon Quaker ideals of restraint into an example of corporate greed.

Being part of the temperance movement, Quakers and other non-conformists pioneered new business models that continue to be relevant today. Instead of competing in price, they worked as part of fraternities to raise the quality of products such as confectionary – a sector which for over 100 years in Britain was in the hands of three Quaker businesses: Cadbury of Birmingham, Fry’s of Bristol and Rowntree’s and Terry’s of York.

Key to their ethical business was a commitment to fair prices. That was as much to do with transparency, which had been missing from barter trade, as with the commitment to good quality rather than cut-throat competition in a race to the bottom. Quakers were renowned for their pursuit of shared prosperity that benefited both the business and its employees. Customers knew they were not being ripped off and suppliers did not have to haggle over prices.

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Of equal importance was the approach to workers. The Cadbury brothers, for example, built the village of Bournville on the south side of Birmingham for their employees. This model of urban development came with schools, parks and leisure facilities for workers and their families. The Cadbury firm was also one of the pioneers of pension provisions and new initiatives such as providing a staff canteen.

Knowing that a healthy workforce would be more productive and stable, Cadbury employed company dentists and doctors before the creation of the NHS. “The welfare of employer and employed is not antagonistic, but complementary and inclusive,” so said Cadbury in 1912. “Each position brings its duties and its rights.” Rather than a collection of individuals focused on their separate advancement, companies like Cadbury were more like corporate bodies committed to the mutual flourishing of their members.

There are many lessons for today’s economy. One is the importance of balancing individual responsibility with a sense of fraternity. The ethos of self-reliance among Methodists and Quakers is bound up with the emphasis on fraternal help. As Danny Kruger, government adviser and founder of the rehabilitation charity Only Connect, wrote in 2006, “Fraternity is the sphere of belonging, of membership, the sphere of identity and particularity”. Ethical enterprise is just as much a space for fraternal relations as friendly societies in the past or charities nowadays.

Another lesson is the provision of services that help people to combine their work with family life. This includes more generous arrangements for maternity and paternity leave, support for childcare as well as flexible working hours. Instead of waiting for the state to legislate, businesses could and should increase the ways they support working families.

Globalisation and the digital age are changing the context, but the fundamental task is to build a just economic and social settlement that combines new sources of prosperity with the protection of people in their families, communities and workplaces. There is much to learn from Protestant practices anchored in the dignity of labour and the sacred character of both land and life.

That was the undiplomatic choice of words attributed to Boris Johnson, the minister who oversees Her Majesty’s diplomatic service. The appropriateness – or otherwise – of the two-word assault on a Brexit-sceptical manufacturer has been pontificated upon enough already.

I’m still reeling from the claims of a large number of Conservative big wigs that any slapdown of the merchant class by their party was somehow akin to a bishop abandoning the Bible, or a Labour leader attacking the NHS.

It’s one thing for the Left to to paint the Right as nothing more than the political wing of the accountancy trade. It’s much worse when the home team is reinforcing the view that centre-right political movements are, like Oscar Wilde’s cynic, conscious of the price of nearly everything but blind to the value of anything that is truly important.

One person who needed no encouragement to direct Johnsonian-type anger at business was Adam Smith. If the Scottish philosopher (and note that I didn’t write ‘economist’) were around today, I have no doubt he’d authoritatively be issuing his erudite equivalent of “f**k Lehmans and other banks for their recklessness that helped cause the 2008 crash!” He’d need little persuasion to add a “F**k VW!” for the way the German car giant cheated environmental standards’ or a “F**k property developers!” for the ways they conspire to keep house prices at levels suited to their profitability than to homebuyers’ means.

We can be confident of such robustness because, throughout his writings Smith adopted uncompromising language about the tendency of traders and merchants to behave badly. “Clamour and sophistry”, “impertinent jealousy”, “mean rapacity”, “mean and malignant expedients”, “sneaking arts” and inclinations to “interested falsehood”, aren’t from a book by Marx or Engels or Jeremy Corbyn or Bernie Sanders. They’re from the 18th-century’s Mr Smith.

John Maynard Keynes (the runner-up to Smith as most notable economist to have emerged from Britain) warned that the theories of ancient scribblers or long dead economists tend to hold too much power over people of the current day. If, despite Keynes’ disappointment at us, we are to have a reverence for seminal writers and books from a long gone era, we should at least make an effort to ensure we have understood them correctly.

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And that is the importance of the, sadly very necessary, reintroduction to Adam Smith that has been written by Jesse Norman, a serving Conservative MP and a transport minister.

Adam Smith – What He Thought and Why It Matters is part a work of economic philosophy; part a manifesto for a decade after the crash; and part a biography of the ‘father of modern economics’, who neither married nor had children of his own. But it’s wholly a 308-page rescue job. Norman directs readers to the fullness of Smith’s writings, rather than the misrepresentations of them by certain contemporary think tanks and pundits who have adopted his intellectual works with a standard of care that would embarrass certain Dickensian workhouses.

In addition to an acute awareness of business malpractice, Smith, Norman’s readers learn, advocated important roles for government in curbing market excesses, undertaking public works and didn’t just worry about absolute poverty but inequality, too. Pretty relevant, eh? And contrary to the regularly posed ‘Adam Smith problem’ the two key books he wrote – The Wealth of Nations and the earlier, lesser honoured Theory of Moral Sentiments – are not difficult to reconcile but wholly complementary.

Just as Smith was a friend and admirer of his contemporary Edmund Burke (a hero of more conservative types and the subject of a previous biography by Norman), Smith’s own writings were complementary too. “In contrast to modern practice, Smith did not compartmentalise politics and economics”, writes Norman within a particularly important section. I introduced Smith as a philosopher. But Norman notes a “science of man” throughout Smith’s writings, of a wide-ranging character. Scotland’s son understood that explanations of key economic or other phenomena, writes Norman, could only be partial if cut “away from politics, from psychology and sociology, and from ethics”.

Holistic thinkers like Smith are badly needed today. At a time when changes in technology, the nature of capitalism, democratic organisation, family structure and journalism are happening simultaneously and interactively, at the top of our societies we have tech giants who turn blind eyes to immoral uses of their products, economists who only count what is statistically counted, and journalists for ‘national’ newspapers who rarely leave London or Washington or Brussels. It’s not that surprising that these bunkered elites keep getting surprised by the world around them.

I suspect Smith would have scoffed at the attack on Norman from the London-based Adam Smith Institute. ‘With Jesse Norman as a Tory MP, why bother having a Labour Party’ was the title of a blog by Tim Worstall that accused him of being “drippingly wet”.

Norman’s crime was to question the ways in which global tech firms avoid making serious contributions to the tax takes of countries they operate in. The ASI’s Tim Worstall insists that businesses should do as Milton Friedman advised and focus solely on maximising profit and shareholder returns.

This clean, simplistic, unworldly idea is a good example of why libertarians are essential components of centre-right parties throughout the world (reminding more State-friendly conservative types to avoid over-regulation and over-taxation) but would be terrible leaders of any electoral enterprise. As Smith understood, there are cultural and patriotic understandings that business organisations neglect at their peril. If people of commerce don’t attempt to act as good citizens they will enjoy levels of public suspicion that make them vulnerable to politicians who’ll regulate them excessively.

Smith’s evocative “invisible hand” phrase – coupled with his dictum that we should not expect our dinner from the baker, brewer and butcher because of their benevolence but because of their self-interest – helped people understand how self-serving behaviours can enrich the general population more effectively than centrally-planned and managed systems. But it was possibly too evocative. The temptation is focus on that aspect of his work, much like a preacher who has a few favourite Bible verses and neglects study of the longer Old and New Testament books which can appear too much like hard work or too uncomfortable to embrace. But there’s so much more to Smith than markets good, governments bad, baa, baa, baa.

While Smith was a man of the Enlightenment he also had drunk deeply of the Judaeo-Christian account of human nature and of our capacity to do both bad, ‘Fallen’ things as well as to ‘Create’ and accomplish. This takes us back to where we started. Smith opened the eyes of the world to the ways in which free markets were much more effective creators and distributors of wealth than any of the alternatives that ‘planned’ to do so.

But this didn’t make him an apologist for the men and women of business who he knew were as capable of sin and selfishness as any other human being or human enterprise. Checks on the tendencies of business, politicians, theocrats or any other entity that amasses power to abuse those powers should not be after thoughts in the formulation of public policy but central to them.

Or, as a Boris Johnson-Adam Smith hybrid might say: “F**k monopoly power!”, F**k cosy relations between big donors and politicians!”; “F**k tech giants who don’t clean up their own messes!”; F**k economists and academics and policymakers who know nothing outside of their area of partial expertise!”.

Oh, and f**k think tanks that claim to represent great thinkers but haven’t, seemingly, read the full works of those thinkers. A charge that could not begin to be levelled at Jesse Norman.

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Today, with the dark side of capitalism once again on display in vast wealth inequality, stagnating wages and cronyism, we are again associating money with immorality. As a result, Marxist thinking is on the rise and, so too, it seems, are the anti-capitalist pronouncements of the Church. But to reject capitalism as immoral is a mistake.

It was the 18^th century political economists David Hume and Adam Smith who turned the idea of the immorality of markets on its head. Hume argued that without the desire to acquire ever greater riches, we would be idle.[1. Backhouse, 2002] In pondering how economies developed from hunting and gathering to factories, offices and new technologies, Smith suggested that the market harnesses selfishness and channels it in a direction that works in the best interests of society. The natural harmony of the market would translate individual desires into a wider social good. In his own words, “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”.

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Smith also believed in the power of the market beyond its money-making power. His Theory of Moral Sentiments placed individuals in the context of a wider society, and brought morality to bear on self-interest. He saw the pursuit of individual life ambitions, not the maximisation of riches, as the key goal in life.

By using the market, he argued, we can more easily and cheaply meet our material needs, but that would also leave more time and resources for us to fulfil whatever non-material goals we may have. Rather than the Church imposing its own view of what our goal should be in life, Smith believed we should answer to our inner selves – to an “impartial spectator” that sits inside each one of us. That is the freedom markets provide, and why accusations of immorality are misplaced.

Here are four reasons why a defence of markets is a defence of much more than money.

First, as Adam Smith well knew, the prospect of profit encourages us to solve problems and meet the needs of our fellow citizens, making our lives longer, less arduous and more pleasurable – just think of the life-saving drugs, the household appliances and the technological devices we take for granted. Markets mean that we are incentivised to care about each other much more than we otherwise would. How else does the capitalist make money but by serving the consumer?

Second, by connecting people across distant lands, and from different backgrounds, markets encourage tolerance. To quote Voltaire: “Go into the London Stock Exchange… and you will see representatives from all nations gathered…Here Jew, Mohammedan and Christian deal with each other as though they were all of the same faith”.[2. Quoted in Postell et al, 2011] Markets are the enemy of intolerance. Markets thrive off diversity.

Third, markets allow us to escape social practices which are exploitative. For centuries, communities have persecuted or abused ‘non-conformists’ and the vulnerable – burning certain women as witches, mutilating women’s genitals, breaking the toes of young girls in order to bind their feet, oppressing the LGBT community and those considered “second class” on the basis of the colour of their skin. For those who see society as something other than a happy and harmonious place, the market provides an escape mechanism. Markets provide us with the ability to be financially independent. They allow us to engage with one another anonymously – in a way that ensures we are fed and clothed without having to acquiesce to another’s world view.

Fourth, while the competition which markets enable might on the one hand encourage selfish behaviour, it also weeds out immorality. With competition, individuals are, in general, better able to escape individual cases of abuse or mistreatment compared to a situation in which there is one sole employer, the state.

The film The Lives of Others, which follows a group of young intellectuals in communist Berlin in the early 1980s, highlights just one individual story of abuse, whereby a senior official uses his power to sexually exploit women, demanding favours in return for overdue promotions. Without competition to expose them, the state can cover-up wrongdoing, meaning that abuses continue. Indeed, the state has an incentive to do so (much like the Church), precisely in order to hold on to its reputation for the “social good”.

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Capitalism is the best guarantee of individual freedom

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In the marketplace, while cover-ups can and do happen, competition pushes in the direction of rooting out wrongdoers. Where poor practice, even abuse, is taking place, consumers can exercise their choice to move to another provider. Workers can also move to another employer. Of course, the mechanism for this to happen is far from perfect – consumers do not always find out the full facts and workers facing abuse are not always mobile – but at least markets provide the possibility of punishment and escape that is missing when the state has a monopoly of power, and, importantly, a monopoly of force.

There is, however, a caveat: markets can be made more (or less) moral. As Steven Pearlstein wrote in the The Washington Post under the headline: “Is capitalism moral?”

“[T]he way markets distribute rewards is neither divinely determined nor purely the result of the ‘invisible hand’. It is determined by laws, regulations, technology, norms of behavior, power relationships, and the ways that labor and financial markets operate and interact. These arrangements change over time and can dramatically affect market outcomes and incomes…In our current debate over capitalism, too much attention is focused on whether, how or how much to redistribute the incomes that markets have produced, with too little focus on the institutional arrangements that determine how that income is divided up in the first place.”

This notion – that there is no single, divinely determined market outcome – is now commonly associated with the Left-leaning idea of ‘Predistribution’. However, Classical Liberals were well aware of the way in which market outcomes depended on the foundations on which they were built. Academic Valeria Mosini argues that Leon Walras, 19^th-century economist best known for his mathematical proofs of the benefits of markets, had a much more nuanced view of markets than he has been given credit for.[3. Mosini, 2012] While he argued that the market worked well, he pointed out that the outcomes depended on the context.

In thinking about the appropriate backdrop for markets, these early economists confronted numerous questions about what is or is not “fair” (as well as what is or is not efficient). This included debating laws on bankruptcy, the responsibilities of central banks, whether the state should guarantee our savings, whether owners of stocks and shares should be personally liable for the debts of the companies they invest in, and whether inventors should be able to patent their ideas. The ‘Institutional School’ of J.R. Commons went on to make the now largely forgotten point that institutions – the rules of the game which we choose to construct for markets – reflect what society thinks is right or wrong, which can have big implications for class, gender and race.

All of which means that markets can be redesigned to work ‘better’ – to deliver more equitable and environmentally sustainable outcomes. But in redesigning markets, economists and policymakers cannot escape what society deems to be ‘good’ or ‘bad’ – what we deem legal to buy and sell (sex for example), and the types of incentives we choose to put in place for market actors, such as through discrimination law, taxes, subsidies, and regulations.

It wasn’t that long ago, after all, that economists argued against (rather than in favour of) equal-pay-for-equal-work legislation on the basis that women have vital work to do within the home and that equal pay would disincentive such work. Their thinking was muddied by a moral code that concerned what people ‘should’ or ‘should not’ be doing. Society is always the limiting factor in market design. As society advances – often as a result of the very freedoms that markets support – the rules of the market must be redesigned.

The market is far from perfect, but it must be understood in the context of an imperfect society, one which becomes worse when cloaked in the heavy hand of the state. The market is much more moral than we today like to think. When Mandeville’s Fable of the Bees attacked puritan values in 1714, questioning the commonly held notion that it was Christian morality that “held society together” and suggesting that private vices can in fact be to public benefit, there was an outcry.

Individual freedom could not have been seen as more radical – leaving people to their own devices, it was thought, would wreak havoc. Today the failings of capitalism are the failings of society to effectively design the rules of the game. Markets are not the problem; the problem is the actors that shape them.

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