The Institute of Economic Affairs (IEA), an influential right-wing thinktank, has published a book in defence of capitalism. Its author is Eamonn Butler, the director of the Adam Smith Institute, another neoliberal thinktank. The book aims to cut through “prejudice and distortion” and outline “the subject of capitalism plainly and fairly”. But there are a number of claims in this book that really don’t stack up.
“Capitalism punishes greed”
Butler wants to dismantle the idea that capitalism is based on greed. He writes [p25]:
Lastly, greed is not exclusive to capitalism; it exists in all economic systems and all walks of life. Capitalism is certainly based on self-interest, which is a natural human characteristic: if we had no regard for our own interests, we would not survive very long. But capitalism punishes greed. Free people simply do not deal with producers they believe dishonest, untrustworthy or focused too much on themselves and too little on their customers.
It’s hard, though, to square the claim that “capitalism punishes greed” with the way that free enterprise is playing out. The EU recently fined Google €4.3bn for breaking anti-trust laws. The company broke these laws in order to dominate the market. This is a record-breaking fine, outstripping the EU’s previous largest of €2.4bn, also imposed on Google, last year. This was also a monopoly-abuse penalty.
‘Monopoly is not an inevitable part of capitalism’
Butler also criticises the idea that capitalism leads to monopolies. He argues [p23]:
Nor is monopoly an inevitable part of capitalism. Marx thought that, because of economies of scale, capitalist enterprises would inevitably grow into massive monopolies. But in reality there are diseconomies of scale too: large enterprises are much more difficult to manage, and much slower to adapt to changes in both technology and consumer demand − giving time for smaller, nimbler competitors to steal business from them. True, producers can and often do try to use political influence to rig markets in their favour: but this is completely contrary to the concept of capitalism, not essential to it.
But we can see that the number of small and medium enterprises (SMEs) in the UK is rapidly declining. Mergers and monopolies often squeeze smaller competitors out of business [paywall].
Some form of capitalism could be workable and allow SMEs to thrive. But the IEA’s defence of the free market is absurd. Because it simply doesn’t match reality.
– Joins us, so we can keep holding the powerful to account.
Featured image via Pexels / Expect Best
We need your help to keep speaking the truth
Every story that you have come to us with; each injustice you have asked us to investigate; every campaign we have fought; each of your unheard voices we amplified; we do this for you. We are making a difference on your behalf.
Our fight is your fight. You’ve supported our collective struggle every time you gave us a like; and every time you shared our work across social media. Now we need you to support us with a monthly donation.
We have published nearly 2,000 articles and over 50 films in 2021. And we want to do this and more in 2022 but we don’t have enough money to go on at this pace. So, if you value our work and want us to continue then please join us and be part of The Canary family.
In return, you get:
* Advert free reading experience
* Quarterly group video call with the Editor-in-Chief
* Behind the scenes monthly e-newsletter
* 20% discount in our shop
Almost all of our spending goes to the people who make The Canary’s content. So your contribution directly supports our writers and enables us to continue to do what we do: speaking truth, powered by you. We have weathered many attempts to shut us down and silence our vital opposition to an increasingly fascist government and right-wing mainstream media.
With your help we can continue:
* Holding political and state power to account
* Advocating for the people the system marginalises
* Being a media outlet that upholds the highest standards
* Campaigning on the issues others won’t
* Putting your lives central to everything we do
We are a drop of truth in an ocean of deceit. But we can’t do this without your support. So please, can you help us continue the fight?