Conservatives Need to Make Capitalism Work for Everyone

Free markets and globalization have made Britain wealthier, but it doesn’t always feel that way.

It is not inequality that bothers Brits, argues Ruth Davidson, the Scottish Conservative Party leader, in the new online magazine UnHerd. It’s injustice.

People expect that the CEO of a corporation will be the highest paid person on the payroll. What they don’t accept is that FTSE 100 bosses are paid 174 times the average worker’s wage in this decade — compared to 13 to 44 times in 1980.

Especially when many of their companies have received either big fraud-related fines or bailouts from the state.

The distinction matters, because it goes to a broader point.

A system that doesn’t work for everyone

Davidson writes that free markets and globalization have made Britain healthier, richer and more equal.

But it may not feel that way to a teenager living in a pit town with no pit, a steel town with no steel or a factory town where the factory closed a generation ago.

Nor to a young professional who, due to a combination of insecure employment, opaque career progression, wage stagnation and high rental and commuting costs, can’t afford a home.

Britain’s young adults don’t feel they have a personal stake in a system that doesn’t work for them, argues Davidson. Hence they are drawn to populists like Jeremy Corbyn, whose message is simple: stick it to the broken system.

No magic bullet

Conservatives need to do better, she argues:

  • Too much profit comes from tax avoidance, land speculation, financialization and other unproductive economic activity. Policy needs to encourage innovation and high performance.
  • Closing loopholes, increasing enforcement and overhauling regulatory frameworks can go some way to addressing the creeping cronyism that is making capitalism uncompetitive and unfree.
  • Government needs to set the tone by using its vast array of levers and resource as a carrot too.
  • Reward firms that invest in research and development, in workplace training and in productivity gains.
  • Channel public investment into education, training and physical as well as digital infrastructure.
  • Give local communities more leeway to build homes.

There is no magic bullet to reboot capitalism. But there are things government can do to make everybody feel they benefit from it.