Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

The Case Against Free-Market Capitalism

Ngaire Woods 20th October 2017 3 Comments

Ngaire Woods

Ngaire Woods

Free-market capitalism is on trial. In the United Kingdom, Labour Party leader Jeremy Corbyn accuses neoliberalism of increasing homelessness, throwing children into poverty, and causing wages to fall below subsistence level. For the defense, Conservative Prime Minister Theresa May cites the immense potential of an open, innovative, free-market economy. Similar “proceedings” are taking place around the world.

Just a quarter-century ago, the debate about economic systems – state-managed socialism or liberal democracy and capitalism – seemed to have been settled. With the Soviet Union’s collapse, the case was closed – or so it seemed.

Since then, the rise of China has belied the view that a state-led strategy will always fail, and the global financial crisis exposed the perils of inadequately regulated markets. In 2017, few of the world’s fastest-growing economies (Ethiopia, Uzbekistan, Nepal, India, Tanzania, Djibouti, Laos, Cambodia, Myanmar, and the Philippines) have free markets. And many free-market economies are suffering from growth slowdowns and rapidly rising inequality.

Against this background, some politicians are no longer defending free-market capitalism in terms of economic growth or the gains from globalization. Instead, they focus on individual opportunity. May, for example, has credited the system with reducing infant mortality, increasing life expectancy, driving down absolute poverty, boosting disposable incomes, expanding access to education, and slashing illiteracy rates.

But these claims aren’t in line with the facts. Start with maternal mortality. Much of the world has made great strides in making childbirth safer. From 1990 to 2015, Albania reduced its maternal deaths per 100,000 live births from 29.3 to 9.6. China, the poster child for state-led growth, reduced its rate from 114.2 to 17.7.

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.

Meanwhile, the trend in the United States, the paragon of free-market democracy, has gone in the opposite direction, with maternal deaths per 100,000 live births actually rising, from 16.9 in 1990 to 26.4 in 2015. Equally shocking, the morbidity and mortality of white (non-Hispanic) middle-aged men and women in the US increased between 1999 and 2013.

The claim that free-market policies “slash illiteracy” is also misleading. In England, some 15% of adults (5.1 million people) are still “functionally illiterate,” meaning that they have literacy levels at or below those expected of an 11-year-old. Scotland’s most recent survey showed a decline in literacy, with less than half of the country’s 13- and 14-year-olds now performing well in writing. In fact, if you Google “successful literacy campaign,” the country with astonishing literacy gains that fills your screen is Cuba – hardly a free-market system.

The conservative case, eloquently articulated by May, is that a free-market economy, operating under the right rules and regulations, is the greatest agent of collective human progress ever created. If that claim is true, the only logical conclusion is that we are doing it wrong.

So what measures are needed to get it right? The practical solutions on offer seem to be fairly consistent across the political spectrum. Indeed, for all their furious positioning, the differences between left and right seem to have collapsed in this regard.

In the UK, the first suggestion is to ensure economy-wide investment and growth, which will require government intervention. Corbyn proposes a National Investment Bank and Transformation Fund to mobilize public investment and create wealth and good jobs. May, for her part, suggests an industrial strategy to promote “growth across the whole country,” helping to “turn local areas of excellence into national export champions.”


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

Second, private-sector leadership must change, in order to prevent short-term thinking, tax avoidance, and other forms of opportunism and personal enrichment. Here, Corbyn focuses on accountability in corporate boardrooms, while May calls for giving workers and shareholders a stronger voice in firms’ decision-making and ensuring that the largest companies have incentives to think long term.

A third corrective is to improve employees’ pay and working conditions. In Britain, even as the economy has grown, wages have been dropping – by 10% from 2007 to 2014. Corbyn promises to take action to stop employers from driving down pay and working conditions. For May, “all work should be fair and decent, with scope for development and fulfillment.” Both make the case for improving vocational training and technical education.

Fourth, in Britain, the government must address the public-housing crisis. In the 1950s and 1960s, an average of some 300,000 houses were being built every year; that figure has now dropped to less than half. Corbyn proposes a review of social housing, rent control, and regeneration for the people. May has announced the creation of a £2 billion ($2.62 billion) fund for building more council housing.

Finally, Britain needs more effective rules and regulations to ensure that privatized utilities deliver cheaper, more sustainable services. Corbyn accuses companies of handing out large dividends to shareholders, while infrastructure crumbles, service deteriorates, and companies pay far too little in taxes. May promises to end “rip-off energy prices.”

The orthodoxy established by Margaret Thatcher and Ronald Reagan in the 1980s – to roll back the state, after a decade of profligate and bloated government – is guilty as charged. A new consensus is emerging that more active and effective government is required to boost growth and expand opportunity. The jury is still out, however, on whether governments will be given the tools and support they need to rehabilitate the defendant.

Republication forbidden. Copyright: Project Syndicate 2017 The Case Against Free-Market Capitalism

post-Brexit
Ngaire Woods

Ngaire Woods is dean of the Blavatnik School of Government at the University of Oxford.

Home ・ Economy ・ The Case Against Free-Market Capitalism

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

biodiversity,COP15,China,climate COP15: negotiations must come out of the shadowsSandrine Maljean-Dubois
reproductive rights,abortion,hungary,eastern europe,united states,us,poland The uneven battlefield of reproductive rightsAndrea Pető
LNG,EIB,liquefied natural gas,European Investment Bank Ukraine is no reason to invest in gasXavier Sol
schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
Fit for 55,access to justice,Aarhus convention Access to justice in the ‘Fit for 55’ packageFrederik Hafen

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube