Getting across the ideas to support free enterprise

DRAFT - Work in Progress!


Supporters of a flourishing, enterprising society have a critical problem: leftist ideas have captured popular imagination, and capitalism as a concept has become tainted, toxic even.

In many ways, leftist analysis is correct, in that the problems they have identified are genuine: there is indeed too much greed and corruption, but they have conflated free-market capitalism with crony corporatism, with our current system having too much of the latter and too little of the former.  Unfortunately, the left's solutions are bogus; their cure is far worse than the disease, and they would throw out the capitalist baby instead of the corporatist bathwater.

In order to address this, we need to understand the leftist mindset, appeal to what motivates them, and tackle their false assumptions in terms they will understand. The work of Jonathan Haidt is very useful in this regard - moral foundation theory provides a key to open the door into their world. Essentially, they are most activated by the Care/Harm foundation - they care deeply about the disadvantaged.

Then then we need to find a way of communicating these ideas, explaining how a reformed capitalist system would deliver more of what they are looking for than Socialism could. Unfortunately, this also means we have to explain more complicated concepts, like Moral Hazard, and demonstrate that some policies that seem to provide care actually do more damage in the long term.

Here are some concepts I believe we need to get across, and misconceptions that need to be tackled, related to Fairness and Wealth Creation.

Fairness:

1. Reward for effort: it is only fair that those who work hard to produce wealth are rewarded. That's a fundamental reason for the establishment of the Labour Party in the first place - for the workers to get their fair share of the wealth they were responsible for creating. What is someone else's fair share of what you have worked for? If that is true of exploitative business owners, it's also true everyone in society.
2. Fairness & Risk: anyone risking their capital in order to create wealth is entitled to a reward for that investment, but those without skin in the game should not be able to take advantage.
3. Unfairness & Cronyism: crony corporatism provides too many opportunities for fat cats of various descriptions an easy life on the backs of the wealth-creators. 
4. Unfairness & Free-riding: in order to look after those who genuinely can't look after themselves, we need everyone who is able to make a contribution to do so. 
5. Unfairness & Debt: kicking the can down the road is appallingly unfair; how can it be fair for future generations to fund the lifestyles for members of the current generation who haven't earned it themselves? Burdening future generations with debt is immoral.

Wealth Creation:

1. Wealth underpins everything:  in order to properly care for others, someone has to produce the wealth in the first place
2. Money is not Wealth: people are mercantilist and think of wealth in terms of money, whereas wealth is actually what you can obtain with the money: houses, cars, phones, food, experiences, etc.
3. Wealth is Dynamic: it gets destroyed, and therefore further wealth needs to be created to replace it; for economic growth to occur there needs to be more creation than destruction. Some wealth is ephemeral (used concert ticket anyone?), other forms are durable, but even houses wear out over time if not maintained. 
4. Incentives: People are lazy - if they have opportunities to seek rent they will, those with vested interests especially.  People won't risk their capital unless they will be rewarded. Changing incentives alters behaviour - encouraging them to work hard or risk their capital (both of which play a part in creating wealth) instead of seeking rent (which doesn't)
5. Cooperation: societies do not thrive and become prosperous without cooperation 
6. Competition can be the opposite of greed: it is there to keep people honest and to discourage parasitic rent-seeking
7. Profit isn't necessarily exploitation (not perhaps so easy to explain!)
8. Privilege can be earned (and thus deserved)
9. Decentralisation: no society has ever flourished in the long term, except with 3 conditions: Independence, Dispersal of Power, and Interdependence

Markets:

• Housing is not a free market - that is why there is a shortage!

We need supporting evidence for those assertions, of course, but we need to appeal to emotion as well as to reason. We should not be afraid of adopting the Tripartite motto of the French Revolution: Liberté, égalité, fraternité, even if by "Equality" we mean Equality of Dignity and Equality before the Law rather than Equality of Outcome.

Ultimately, however, those of us on the right are prepared to deal with the world how it really is, not how we would like it to be: there are no solutions - only trade-offs. The perfect is the enemy of the good.

Ideally, we should be looking producing social media memes along those lines (and the list above is far from exhaustive). Exactly how do so so effectively is going to be a major challenge...

The Crisis of Labour

According to Adam Smith, there are 3 different types of people:

• labourers, who produce wealth through their own efforts;
• employers, who employ capital to produce wealth, for example through investing in machinery;
• rent-seekers, who don't actually produce any wealth themselves but who seek a return for the use of assets they own, particularly land.

Actually, that is not correct at all: there aren't 3 types of people, but these are different types of behaviour that can be exhibited by people; an individual can take on more than one of those roles at different times, or even at the same time, such as entrepreneurs who typically are both labourers and employers.

Before the industrial revolution, entrepreneurs were rare, or at least not sufficiently numerous nor effective to create a great of wealth, with anything they did produce being vulnerable to predation by the rent-seeking ruling classes, which reduced the incentive for them to make the effort. The vast majority of people worked on the land, with the landowners creaming off any profit produced through rent. Landowners were thus able to exploit their workers to have comfortable lives themselves, but the workers were too busy just surviving to do much about trying to improve their own lot - the times when they did organise collectively, such as the Peasants Revolt, are not remembered for being a great success. To be an agricultural labourer was such a precarious existence that many volunteered for the army, not exactly an attractive proposition if you consider the consequences of battle during, say, the Napoleonic Wars. That's not to say that all landowners exploited their workers; and indeed some noble families propagated a culture of duty to care for their tenants, providing relatively good quality housing. But it's quite clear, leaving aside the middle classes and professionals who inhabited the towns, that in the countryside there were 2 distinct classes, the working lower classes being exploited to a greater or lesser extent by the rent-seeking upper classes, the divisions between the  classes in England exacerbated by the lower classes being Anglo-Saxon in origin, and the upper classes being descendants of the Normans who came over with William the Bastard.

The Industrial Revolution changed things.  It should be noted that many early industrialists did not originate from the landed gentry, but were often non-conformists, who were not accepted into genteel society, and who thus had the incentive to work hard. These early capitalists provided opportunities for the workers; although the lot of many workers was still miserable, and exploitation continued, nevertheless for most it was an improvement on agricultural labouring, and slowly they were able to enhance their lives. Sufficiently indeed that, being based in greater centres of population, and with increasing leisure time. they were able to organise increasingly effectively in various ways, giving rise not just to unions, but to Friendly Societies and other self-help organisations, and eventually the Independent Labour Party. These achieved a great deal, improving the lot of the typical working man and woman substantially over time, enabling them to earn a fairer share of the wealth they had created.

The workers became more self-confident, better educated, and more aware of the possibility of being exploited, whether actual or not. They were thus ripe for seduction by Socialism.

Now Marxism makes no distinction between Employers and Rent-Seekers; it conflates the two categories into one: Capitalists. These are defined as the enemies of the working classes.

In truth, this is a mis-charaterisation: some of the capitalists had actually provided the means to enable the workers to achieve emancipation and therefore were effectively allies of the workers, rather than their enemies. Although there were undoubtedly many conflicts of interest between business owners and workers, by cooperating together they managed to create massive amounts of new wealth, at least some of which went to the workers. It also doesn't take account of the risk undertaken by entrepreneurs - they had more skin in the game than their labourers, and so it is quite fair that should take more of the rewards.

Of course, as noted originally, any one person can play any of the 3 roles, and so entrepreneurs can easily morph over time into rent-seekers. The problem is power: once entrepreneurs become successful, they achieve greater power, and no longer wishing take risks with what they have gained, instead look for easier opportunities to capture wealth.

It all boils down to fairness: clearly it is not fair to a worker to be supporting others better off than themselves who did not cooperate in the wealth creation process. Of course, it is very hard to determine the extent of any exploitation: no one actually knows the intrinsic value of anything - that's why we need markets.

But the point is, it is the predatory, parasitic rent-seekers who are the enemies of working people, not the capitalists. Or rather, it is the predatory rent-seeking behaviour that exploits the workers.

The truth is that free-market capitalism produced so much wealth that even the workers who had not received a fair reward for their labours still enjoyed a standard of living far in advance of their forebears before the industrial revolution. So much so indeed that, these days, those on benefits have a better standard of living than an average worker in the time of their great-grandfathers.

Exploitation of the wealth-creating workers, however, is still present. Rent-seeking parasitic predators are still with us, but have developed new forms. Fat cats of all sorts abound.

How has this happened?

Crony corporatism is a major factor; instead of having to own land in order to seek rent, being an executive in a major corporation is not so different from being a member of the nobility in a medieval principality; it can be a license to prey upon the workers.

Similarly, the growth of the state has provided all sorts of opportunities for parasitic elites to capture wealth. For example, the more laws and regulations there are, the more work there is for lawyers.

The list goes on: banksters, university administrators, local government executives, professionals of various descriptions, even train drivers. All earning substantially more than the workers who actually create the wealth that these modern-day parasites rely upon.

Union leaders, who enjoy cushy lifestyles at the direct expense of their members, are perhaps the ultimate example, especially those that benefit personally from trouble-making because only the activists take part in their appointment.

Ironically, the well-healed professional classes in public service have been successful not just in capturing more than their fair share of the wealth of the workers, but also in capturing the party of the workers; the Labour party is now dominated by university-educated metropolitan elites.

According to Robert Conquest, the simplest way to explain the behavior of any bureaucratic organization is to assume that it is controlled by a cabal of its enemies. In the case of the Labour Party, it really is.