“It is only when you take responsibility for your life that you discover how powerful you truly are”
Imposed solutions, invented by the well-meaning and installed by the powerful, have never delivered for humanity - whether European single currencies, universal benefits, or the ‘dictatorship of the proletariat’. At the end of the day it’s all down to individuals and, as Ms Hunt says, it’s only when you take responsibility for your life that you discover how powerful you truly are.
I recall twenty years ago there was vigorous debate about the European single currency. It was only a few years after the United Kingdom had ignominiously exited the European Exchange Rate Mechanism in September 1992, with interest rates hoisted very temporarily to 15%. The continental Europeans had got it right, but Britain simply couldn’t hold the line.
At the time there were many esteemed economists saying that you couldn’t have a single currency without having a single government – a body politic - for the whole area. And now, as we watch the Euro unravel in front of our eyes, we see that they were right all along.
Germany has hoovered up all the work, operating at far too low an exchange rate. Italy, Greece and Spain have been left as economic deserts in comparison, operating at far too high an exchange rate. There is no transfer of public works, just migration of people to take the strain.
And so it is with all imposed solutions. Generally, they are born from the best intentions, but they are invariably spoiled by removing personal freedom.
If single currencies create medium-term disasters, universal welfare creates long-term disasters, driving peacetime national debts to huge excess and imposing huge burdens on ensuing generations: see our commentary three weeks ago on ‘Power and Paternalism’.
And in the 19th century Karl Marx produced a radical new way, intended to bring power to the people - but what communism introduced was dictatorship, and oppression, of the proletariat. For example, 4th June is the 29th anniversary of the Tiananmen Square massacre in China: here's the iconic picture of a single person stopping the tanks.
Time and again over the last hundred years, economic tragedy has been caused by the imposition of socialism.
The reason why, of all the -isms introduced by well-meaning people, capitalism has survived and prospered, is because it is built on personal freedom: that is a pearl of very great value, and it’s why those of us who believe in personal freedom must watch over it, and ensure that it doesn’t lose its individual character.
There are, however, several key things to watch out for in our modern day capitalist system:
- The first is excessive intermediation, which kills off the vital link between ownership and responsibility - whether it’s by financial institutions or the state. By concentrating the power to steer these great engines of economic growth away from the people that they serve and employ, we must expect that those same people will eventually bite the hand of those who expropriate the power - whether they are financial institutions or socialist governments.
- The second is to ensure that the majority of businesses are listed on public markets. Over the past couple of decades we’ve seen a real concentration of power in financial markets, both in the US and the United Kingdom. In New York, there were 8,000 listed companies at the peak. Now there are fewer than 4,500. London has seen a similar trend: ten years ago there were more than 3,000 companies quoted on the main and junior markets, but by 2017 it had dropped to only slightly over 2,000. The traditional public market for equities is now in absolute global decline, heralding far-reaching consequences for markets and investors. The real casualty is popular support for the free market itself. This is because, if individuals are denied access to investing directly in shares, they can have no sense of ownership in, nor responsibility for, the great engines of industry which create wealth in such abundance - and they will turn elsewhere, potentially back to socialism (See our commentary ‘Will the dominance of Private Equity become the Achilles Heel of the free market?’).
- The third is to keep the channels open by which individuals can influence these quoted businesses. The effectiveness of personal share ownership involves people finding out about the businesses of which they own a part, and voting. Also, while capitalism should be disintermediated as far as possible, there will always be institutional investors owning shares - and they also must vote. Currently there are not nearly enough investors, personal or institutional, voting: and that needs to change (See last week’s commentary on this subject).
But, most of all, personal freedom is assured by a society built on a strong set of values, and I would challenge anyone to find a stronger set than those of the ‘Share’ enterprises:
- Respect for Others: is essential, not just for those from whom we might receive favours but for all we come across - to walk alongside people showing genuine care and attention, not talking down or treating them as cogs in a great machine;
- Empowering Others: democratising expertise, providing the knowledge and tools by which people can achieve their own individual potential;
- Trust: so that people know where your priorities lie, and that they can have confidence in you looking after their interests - particularly important when so many businesses confuse the roles of agent and principal;
- Clarity: being clear, open and transparent in all things - no hidden agendas; and, particularly
- Enterprise: looking forwards with hope and determination for a better life, not just for yourself and your family, but for all those whose lives you touch day by day.
Let’s put these in the context of young people, because they are the world of tomorrow and we need to respect them, empower them, help them to build confidence and hope just as much - indeed still more - than our own contemporaries.
There are two specific actions underway to give young people right across the United Kingdom a better financial future. First, a determination to resolve the muddle that Child Trust Funds - one of Gordon Brown’s good ideas - have got into, before the oldest recipients reach 18 in September 2020.
Child Trust Funds were put in place for all children born between 1 September 2002 and 2 January 2011. However, although six million were set up (compared to Junior ISAs – just over one million), approximately one million are ‘addressee gone away’ - that is, lost to the young person to whom they belong. Unfortunately, children from the poorest homes are the worst affected by this ‘addressee gone away’ rate, with those in families in receipt of Child Tax Credit suffering a 33% ‘lost’ rate. We’re determined to re-link as many young people as possible to their accounts.
Second, we’re campaigning hard for a GCSE in Financial Education. It is ridiculous that so many young people go to university or work so unprepared for the daily financial challenges of life. It may be compulsory in the curriculum, but it won’t be taught properly unless it is examined properly.
And finally, the issue of financial literacy leads to some thoughts about the word ‘Goodwill’. The dictionary comes up with two definitions for ‘Goodwill’:
- Friendly, helpful, co-operative feelings or attitude; and
- The established reputation of a business regarded as a quantifiable asset, and calculated as part of its value.
How interesting that these two are combined in the same English word! For the values on which the first definition is based are indeed a key reason underpinning the second, accounting definition. Both reputation and personal freedom for all rely on a friendly, helpful and co-operative approach to all we meet – in other words, ‘willing good to others’.
So what drives this whole framework of capitalism forward is not just enterprise but also a keen belief in values-based personal freedom for all, so that it can continue as the only economic system able to trump imposed solutions and the tragedies that they bring about.