The American essayist Ralph Waldo Emerson once observed that a foolish consistency is the hobgoblin of little minds. Swap “foolish consistency” for “foolish label” and one has a good description of our contemporary political discourse.
Theresa May defends “free market capitalism”. Jeremy Corbyn makes the case for “21st century socialism”. So the headlines and the news reports yell at us. So the party leaders themselves inform us in their speeches.
But what do these labels actually mean? What economic policies do they signify? What sort of societies do they describe?
The concept of capitalism dates back to the Industrial Revolution, when wealthy entrepreneurs owned the new physical “capital” that was made possible by advances in technology. The boss of the new textile factory was also the owner. And that ownership conferred immense economic power and social authority, as factory bosses could determine the wages and conditions of the workers.
But who owns the physical capital, the “means of production”, of our modern economy? It’s no longer the people who run the large organisations in which a great many of us work. Millions of us will be invested in these giant companies through our pension funds. Does that make us all “capitalists”, like little 19th century mill owners? Hardly. Economic power has been divorced from corporate ownership. But that doesn’t mean it’s been broadly shared.
Another wrinkle is that today’s most dynamic companies – think Google, Amazon and Uber – actually have very little “capital” in the classic meaning of the word. The value of such firms derives not from tangible equipment or commodities, but from their intellectual property, from the expertise of their high-skilled employees and, increasingly, their networks and brands.
“Socialism” is a similarly problematic label, dating from the era of political struggles between newly-organised workers and the established economic…