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Cooking the Books 1 : Cable and capitalism

“Capitalism”, the Business Secretary Vince Cable told the Libdem Conference in September, “takes no prisoners and kills competition where it can.” (Times, 22 September). He was of course playing to the gallery, but no minister in the Blair and Brown governments ever dared to utter such harsh words about capitalism. They were too scared even to mention the word “capitalism” for fear of upsetting the business world whose interests they knew they were there to serve.

Not that Cable is against capitalism. He’s merely in favour of government intervention to curb its excesses. As one of the Tory Prime Minister’s aides was reported as saying ,“Vince is simply spelling out what happens when you have uncontrolled capitalism”. And, as he himself said, “the Government’s agenda is not one of laissez faire”, adding “markets are often irrational or rigged.”

He – and the rest of the Con-Dem government – are in favour of government intervention to try to get capitalism to work as in theory it is supposed to, with competitive markets keeping prices down and allowing only normal profits to be made in the long run.

If, because of monopolistic practices or rigged markets, some capitalist firms are permanently able to make abnormally high profits this will be at the expense of the profits of the rest of the capitalist class. Not that this will restrain the firms in question – they go for maximum profits, taking no prisoners. So, it’s up to the government to restrain them in the overall interest of the capitalist class as a whole. It’s part of its remit as the executive committee of the ruling class.

Even so, Cable upset the business world. Richard Lambert, the current director general of the CBI, denounced Cable’s “emotional language”, saying “Mr Cable has harsh things to say about the capitalist system; it will be interesting to hear his ideas for an alternative.” A former CBI director-general, Digby (now Lord) Jones condemned his remarks as “rabble-rousing” and unworthy of a member of the government. The Times (23 September) reminded him that “the Business Secretary’s principal task is to help companies to earn profits.” Even the former Labour Chancellor, Alistair Darling, still loyal to business, joined in, criticising Cable for “denouncing business and the City in general” which he said was “extremely damaging to our reputation abroad” (Evening Standard, 24 September).

In response, Cable rather cleverly added to the pre-released text of his speech the words “as Adam Smith explained over 200 years ago.”

He was referring to the following passage from part II of chapter X of Book I of Smith’s The Wealth of Nations:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

While Smith provided the theoretical basis for the policy of laissez faire implemented in Britain (by state intervention) in the 1830s and 1840s – and which resulted in children being sent down the mines – he was under no uncritical defender of the behaviour of capitalists, as director-generals of the CBI might like to think.

In any event, Cable was not offering an alternative to the capitalist system and is well aware of his duty as Business Secretary “to help companies earn [or, more accurately, reap] profits”. That, in fact, is the duty of all governments.