Stick with capitalism


It started out rather depressing. Our hosts were the Friedrich Ebert Stiftung, Germany's Social Democrat think-tank, and the Global Policy Institute, something of a UK equivalent. We were there to discuss The Role of the State in the 21st Century with Polly Toynbee in the chair. So I expected the worst.

And at first I got it. Dr Erhard Eppler, a former Social Democrat politician, was introducing his new book on The Return of the State. 'The state is back', he proudly announced. Market fundamentalism had failed us, most of the planet's problems were in places where the state was too weak, and people were willing to question capitalism and put their trust in the state much more.

Professor David Marquand started from the same prejudices but wasn't sure that capitalism could be written off just yet. Indeed, the world's politicians showed absolutely no inclination to tear up capitalism and replace it with a statist alternative, he thought. It was, sighed Polly, going to be 'the same bicycle, with the promise of better brakes'. There was general mumping all round that while politicians should wave goodbye to the market, they wouldn't.

Thank goodness for that, I thought - the only person with a smiley face by then. Because the market system has taken billions of the world's poorest out of poverty. It's the best anti-poverty device we can imagine. Of course, markets are human, and they only work within a framework of human laws and institutions – rules of property, honesty and contract. And yes, the state has to have the power to enforce those rules. But the awful financial crisis that's hit recently was caused by governments and regulators completely destabilizing the markets. Flooding the world with so much cheap credit, for example, that nobody could see the signals of what was really happening for the riotous noise of the boom.

It's plain that the Left would love 2008 to have been the high tide mark of capitalism. You'd have thought that they might rush forward with some alternative to replace it. But they can't, because we've tried various permutations of the socialist model before, and rejected them They've got nothing left. So yes, we'll stick with capitalism. And the state should stick to its knitting of enforcing the rules that make it work – and properly, this time.