HAS CAPITALISM FAILED?

A week or two ago a friend of mine, putting to me the argument for some kind of socialism, opened up by saying, "Well, for a start, you will admit that capitalism has failed." My answer which was regarded as astonishing, was, "On the contrary, I think it has been, all things considered, an extraordinary success."

I want to discuss with you tonight the implication of that answer. Sweeping generalisations seldom constitute good argument, though they have a mouth-filling character, and an air of finality very attractive to most of us: "Christianity has failed" - because we are at war, and brute force seems triumphant. "Education has failed" - because ignorance and prejudice are still more powerful than reason. "Democracy has failed" - because democrats have neglected their political duty for a generation. And so we might go on with our catalogue of resounding failures. How absurd it all is!

Christianity has not failed. We shall really have to try it before we declare it a failure. Education has not failed. It is we who have attached too little value to it. Democracy has not failed. It is a neglected child, but it is far from dead.

Well, what of capitalism? What is it, for a start?

Capitalism, as I understand it, is that system of social arrangement which recognizes and protects private property and encourages and protects private production and business enterprise for profit. It is a system under which, during the last century, we have seen enormous developments in the recognition of human rights, in living standards, in material comfort, in public health. It is also the system during the currency of which we have had slums, unemployment, poverty, war.

It is open therefore to comment both good and bad, though you will agree that it can scarcely be held responsible for this war in which the capitalist democracies and the greatest communist State in the world are engaged in fighting a national-socialist enemy. But we can agree that the products of capitalism have been mixed. Is this a ground for abolition or amendment? And if we abolish capitalism and try socialism or communism or some other scheme almost inevitably designed and controlled by someone who has failed at capitalism, are we really confident that we shall get a system under which we shall have the good things of capitalism but with no slums, no unemployment, no poverty and no war?

To answer these questions requires some steady thinking. My own has led me to two conclusions, each of them strengthened by some fourteen years of experience of public administration and political experiment and growth.

The first of these conclusions is that there can be no real prosperity and happiness for all if we merely redistribute the world's wealth without adding to it. In other words, a static material civilisation, with enterprise stifled by an iron-bound equality, with the dead hand of the State in control, will mean stagnation, and stagnation will ultimately mean a poverty which will be none the less real because it is shared by all.

If our material civilisation is to produce improved and improving standards it must have a dynamic quality. It must aim constantly at progress. And as there can be no progress without enterprise, the encouragement of enterprise in the most direct human fashion, that is by the prospect of reward, seems to me to be fundamental.

If you look around our own country and think of the great productive concerns which have been built up in it in the last generation - vast enterprises like the iron and steel industry, the machinery industry, the textile industry, giving employment to many thousands and providing the essential condition of our defence and security in this war - and then ask yourselves whether you really believe that these results would have been got under a system of State ownership and control, you will, I am sure, admit that private enterprise, while it must not be allowed to become our master, has been a magnificent servant and can do vital things for us in the future.

The second of my conclusions is that, in envisaging the future world after the war, we should not seek to destroy this driving progressive element which really represents one of the deep-seated instincts of man, but should seek to control and direct it in the interests of the people as a whole. In other words, the choice is not between an unrestricted capitalism and a universal socialism. We shall do much better if we keep the good elements of the capitalist system, while at the same time imposing upon capital the most stringent obligations to discharge its social and industrial duty.

The old conservative doctrine that the function of the State was merely to keep the ring for the combatants has gone forever. The grim picture, dear to the heart of the Yarra Bank orator, of a capitalist system in which there is unrestrained and cruel competition, in which employees are sweated and workers treated like cattle, no doubt had some truth in it - and still has too much to satisfy humane minds. But we have learned a great deal about how to use private enterprise for our own social and national ends. Price control and Government regulation have been limiting factors. Arbitration courts and industrial laws have abolished sweating, except in one or two places where the award-evader has yet to be chased out of his burrow. National insurance, our unsuccessful attempt at which, just before the war, was most disappointing to many and caused my own resignation from a cabinet, must come again. As early as may be, and if possible during the war when employment is high, unemployment insurance should be introduced. After the war, the obligation of industry to maintain employment on a steadier basis must be increased to the limits of practicability; we must become better economists in our attack upon the problem of boom and depression; we must aim at a proper provision of food, clothing and shelter for our citizens. In these and many other ways the duty of each of us to his fellows and to the State must be defined and enforced.

But however elaborate the machine, it must have a motive power, a driving force. And in a material sense that force, I repeat, must be the urge in the human being to strive for progress and for reward - the instinct to get his own private property, to make his own savings, to earn his own independent future. The great race of men is that one in which each individual develops his fullest individuality, in which ambition is encouraged, in which there are rewards for the courageous and enterprising, in which there is no foolish doctrine of equality between the active and the idle, the intelligent and the dull, the frugal and the improvident.

A modern and civilized capitalism has much to contribute to the post-war world.

7 August, 1942