Capitalists must build a society where the chances of prosperity for all are maximised.

10 things capitalism needs but cannot provide
By Tim Montgomerie

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• 10 things capitalism needs but cannot provide
• Capitalists must build a society where the chances of prosperity for all are maximised
• Those that insist that the state has no useful role are as unappealing to voters as those who want it to do everything.

Capitalists need a theory of the state and a theory of society. In order for free markets to function they need to understand what roles limited but strong states and free societies play in building vibrant economies. It’s something that Legatum Institute’s Prosperity Index measures every year. As well as looking at fundamental economic freedoms, the Index also examines the contribution of state-funded services and of social capital to delivering “wealth and well-being”. Friends of capitalism should never deny the contributions that non-market institutions and values can make, they should define them and protect them. Those that insist that the state has almost no useful role are as unappealing to voters as those who want the state to do nearly everything.

I’ve identified ten functions of non-market institutions below. They’ll be at the centre of a new project I’m running for the Legatum Institute, entitled“A Vision of Capitalism”. They’re first thoughts and I’d be grateful for your views on what I’ve got right, what I’ve got wrong or what I might be missing. I can be contacted via tim.montgomerie@li.com

1. Vigorous virtues: So much political debate focuses on whether we should be increasing tax to build a bigger state or whether there should be more privatisation. ....

2. Public order: The importance of law, order, security and of anti-corruption measures being available to every member of a society can be taken for granted in the more prosperous parts of nations like Britain and America but it never should be. .....

3. A minimum, guaranteed safety-net: Inequality is the current obsessionof the anti-capitalist Left, but friends of capitalism should worry most about poverty. ...

4. Competition: It is one of Adam Smith’s most famous quotes: “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.” ....

5. Non-market redistribution: The amount of money that emigrant workers remit from their work in richer countries to their families back home in poorer countries is more than three times bigger than the philanthropic aid that also reaches those nations according to the annual Index of Global Philanthropy.   ....
6. Long-term research and investment in infrastructure: Go to Africa to see what happens to economies when the state isn’t providing basic infrastructure. ....

7. Regulation of pollution and other externalities: We learnt from the communist era what happens to the environment when there are no property rights and when economic underperformance drives politicians to short-term and dirty growth measures. ....

8. Equality in the democratic sphere: Capitalism – as wonderful as it is – cannot provide equal civil rights. Equality before the law. One person, one vote. Protection of minorities and fundamental human rights.....

9. Demerit goods: Some goods like cigarettes, drugs and pornography (at least harder forms) cause social harm. This does not mean they need to be banned but most societies will want them regulated, taxed or in other ways minimised.

10. Local, regional and national identity: ....

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Capitalists must build a society where the chances of prosperity for all are maximised. They can’t do so without a strong, limited state and a strong, free society.

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