I always enjoy my encounters with the CBIs Sir Digby Jones, who is stepping down as the head of the business group. He is jovial, enthusiastic and has a great stock of excellent jokes. Yet his defence of capitalism, as until recently the voice of British business, made me gloomy. I hope his successor Richard Lambert will do better.
The case for capitalism or, as I prefer to say, markets, is not merely so companies can be creamed to pay for hospitals and schools. Markets are deeply mysterious entities which we have yet to understand fully.
Markets stand apart from much of the human institutional landscape because they were designed by nobody. Markets are spontaneous orders which pursue no hierarchy of ends ; that is, markets do not value certain ends over other ends like the state does. The quotes are F A Hayeks. In this sense the only analogy that seems remotely satisfactory is language.
The language of capitalism is that extraordinary mechanism for co-ordinating and signalling that is prices. Prices are the conversation that emerges between those who want to buy and those who want to sell.
At this point much of academic economics and most intellectuals go up a metaphorical cul-de-sac. They argue human beings will not attain equilibriums . Therefore the State can intervene and sort out the chaos of the market riddled with fantasy flaws such as imperfect competition or asymmetrical knowledge . Surrounded on all fronts by the failing agencies of the state, they home in on supposed market failure .
This is the wisdom of fools. Markets and prices are a mass of different perceptions and circumstances, a subtle web of individuals, or firms as agents of individuals, trying to guess tomorrows opportunities.
Consider the calumnies heaped upon that valiant enterprise Wal-Mart, or as we know it better, Asda. Those hostile to capitalism see a monster that forces wages lower, destroys town centres, congests nearby roads, and overcharges. I see an engine that creates hundreds of thousands of jobs and reduces poverty. Indeed Tesco in the UK and Wal-Mart in the US are the greatest poverty-reducing programmes history has ever seen.
The important, the defining, the crucial attribute of the role of Wal-Mart/Asda is that it is entirely voluntary. Nobody is coercing anybody. Indeed the reason it is such a huge success is that large numbers of us go there of our own volition. But even the largest corporations are utterly vulnerable to peoples choices. These may be whimsical or irrational. They m