You can spend forever debating what capitalism is but most definitions would come down to something like “an economic system or model that emphasises the private ownership of the means of production motivated by the aim of making profit for the owners of that capital”.
I was knocking this about yesterday afternoon with a few enlightened people and we all had to laugh: if that’s the definition then let’s be candid about the fact that capitalism has already failed. As bankers and the top management of the world’s major corporations and the fund managers of the world’s major pension funds have already proved, the idea that making money for owners now has any significant link with the prevailing business model that we observe on a daily basis and which is reported in our media is a myth: the aim of management is to enrich management, not shareholders. And the role of pension funds is now very clearly to enrich fund managers or the returns they pay would not be as bad as they are.
The implicit split in the ownership of control of capital, with directors and others acting in a stewardship role as if they are trustees on behalf of those who entrusted their assets to their care is dead: it’s been killed by greed.
In that case the debate is about what comes next,
Perhaps just a little attention should have been paid to those economics classes at Southampton University all those years ago. The concept is after all to be found in Adam Smith. It\’s now known as the principal-agent problem.
As to what we do about it, well, some stuff is hard:
In political science and economics, the principal–agent problem or agency dilemma concerns the difficulties in motivating one party (the \”agent\”), to act on behalf of another (the \”principal\”). Common examples of this relationship include corporate management (agent) and shareholders (principal), or politicians (agent) and voters (principal). The two parties have different interests and asymmetric information (the agent having more information), such that the principal cannot directly ensure that the agents are always acting in its (the principals\’) best interests, particularly when activities that are useful to the principal are costly to the agent, and where elements of what the agent does are costly for the principal to observe. Moral hazard and conflict of interest may arise. The deviation from the principal\’s interest by the agent is called \’agency costs.\'
So that\’s the Courageous State screwed as an answer then, eh?