There is no such thing as ethical capitalism
By James Belchamber | Mon Jun 21 2021
Knives are an inseparable part of everyday life. We use them when cooking, we use them at work. Every day, millions use their nearest knife to open boxes, packages and letters. Just have a think about how many knives are in your house right now.
We also know that knives can be used for great evil; something communities have struggled with for.. well, forever. The solution? Regulation.
Regulation of knives is mostly uncontroversial - as a society, we mostly accept that a chef can carry very sharp and dangerous knives between home and work, but we expect them to travel directly between those places (and we enforce that expectation). Knives for general carry are limited in length and in the way they lock - outside of this, you need a specific reason. Some bemoan this, but generally it's agreed that the liberty of.. well, living - outweighs the infringement on liberty of needing a reason to carry about a dangerous weapon.
The message is clear - knives are a tool, they can cause a lot of harm, and we do not rely on owners of knives to be benevolent and ethical in their ownership, storage and operation of knives. We regulate knives, and the owners of knives, in the pursuit of better outcomes - not banning them, but very clearly setting out rules based on avoiding harm and promoting freedom.
But with capitalism - and, more generally, free markets and commercial enterprise - some have bought into the myth that there is an "ethical" variant we can nurture and trust.
A favourite amongst Liberals in recent years has been "ethical capitalism" - various ideas that centre around change coming from within organisations that participate in a capitalist market, to "fix" the problems in society. This sometimes even comes with a backstory - that capitalism once benefited all "stakeholders" in society (employees, the local community, etc), but a change in the 70s and 80s persuaded everybody to abandon this in favour of "shareholder capitalism" - literally, only doing what's best for the capitalists (the people that own the shares). Their solution? We need to go back.
Of course, this isn't really true - capitalism has been dredging wealth up into ever-narrower pillars ever since it rose as the dominant economic system. Any redistributive effects have either been accidental or, more likely, designed in by either regulations or through literal wealth redistribution (taxing rich people). May I remind you that capitalism has it's roots in the industrial revolution, a time when we massively increased prosperity for lots of people.. and also took out shares in ventures to enslave lots of others?
Capitalism is clearly amoral - a tool for allocating capital - and the real change in the 70s and 80s was the mass rolling back of regulations and progressive taxes. The reasons businesses changed was because they were allowed to change - we opened the floodgates to stock buybacks, we rolled back worker protections, we allowed rich people to keep (and therefore stockpile) more of their wealth. This is what needs to be rolled back.
But this hasn't stopped people ideating over ways to avoid tried-and-proven laws and regulations. We've watched various "ethical" fads come and go (the latest being B Corps, taken up by the inviolably ethical Brewdog), but the reality is that corporations are not going to tolerate something that hits the bottom line - and not only out of greed. The nature of a market is that if one entity doesn't execute on an opportunity, this leaves that opportunity open for other entities. If another entity manages to use that opportunity to out-compete you? Well I hope you can pay your employees' wages with all that good will.
The reality is that the only way to ensure companies, enterprises and capitalists act ethically is to give them no option other than to act in an ethical manner. Regulations need to be placed that ensure every entity in our economy plays by the same rules, and ensures that nobody can gain an advantage by acting unethically. Otherwise, all companies need to do to be "ethical" is to convince people that they're acting ethically - and that's not stakeholder capitalism, that's a marketing budget.
(Also: can we stop expecting consumers to hold these companies to account? Corporations have whole departments of people dedicated to persuading me that I should buy from them - and advertising works, we have tons of evidence of this. Is every individual meant to have a bullshit detecting department informing them on where to buy? What if they're all unethical - do I just go without?)
We know this, so - why are we entertaining these ideas?
There are two things going on here: firstly, Liberals are (rightly) sceptical of government intervention. Just because things are bad, doesn't mean intervention is necessarily good - and just because intervention is necessary doesn't mean we've found an effective intervention. Liberalism has it's roots in wresting power away from states.
But Liberals are also big fans of evidence and progress; this isn't enough to pull people away from viable, proven methods that achieve Liberal aims.
The second is that Liberals have become somewhat entwined with capitalism - such that it may feel like an inseparable part of the ideology. It is true that capitalism and Liberalism have grown up together, but Liberals must stop thinking of it as a "friend of Liberalism". Capitalists are not inherently Liberal and a Liberal society is not an inherently capitalist one - we need to be prepared to tame capitalism for the good of all people, and ensure that we regulate to achieve free and fair outcomes for everyone (not just capitalists).
Now, of course, I can hear the cry from anti-capitalists: "Why tolerate, and try to modulate, a capitalist economy? You're acknowledging that it's dangerous; you're asking us to live with the wolves!" And I hear that; I do. If we had a better economic system then awesome, that would clearly be Liberal and it would be a Liberal endeavour to deliver it. But the economic systems that deliver the best outcomes for their societies are all well-regulated Capitalist economies with strong democratic oversight and functions for intervention; the reality is that we're best placed to deliver meaningful, sustainable change by pursuing that route.
If you'd like it in the form of a metaphor: wolves have always been considered dangerous, and as a species we've endeavoured to eradicate them wherever we've found them. But today wolves are being re-introduced to many parts of Europe - as it turns out, we are best served living with wolves after all.
But we'll probably make a rule to keep wolves away from nurseries, huh?
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