ENTERPRISE and RENT-SEEKING: Feature a MYTHICAL CONFLATION William Davies

SECOND QUARTER 2013 VOLUME 8 ISSUE 1 TAX JUSTICE FOCUS ENTERPRISE AND RENT-SEEKING: feature A MYTHICAL CONFLATION William Davies In the years since the crisis, much has been made of the need to encourage the threat and reach of socialism. But the enterprise. But its champions are using entrepreneurial endeavour a cover for tenacity of those such as Fox, in still seeing reds under the beds in this age of spiralling policies that favour the extraction of risk-free rents. inequality and the near disappearance of private sector unionism, is quite remarkable. Either due to chronic failure of imagination, neoliberalism? Why are we still so stuck with or sheer nostalgia, the assumption of this here was a 19-year period, between it? And is there a different capitalism, or even revitalised New Right seems to be that the fall of the Berlin Wall and the an alternative to it? One small consolation fall of Lehman Brothers, when Britain is currently experiencing the 1970s T of a protracted economic crisis is that such all over again, and de-regulation will ride to ‘neoliberalism’ became virtually invisible to questions are put on the table, with often the rescue. everybody, save for its critics in what was enlightening public results. called the ‘anti-globalisation movement’. One curiosity of this baroque policy revival There was no longer a distinct political Inevitably, this hubbub has drawn some of is that, in its inevitable anti-tax rhetoric, its movement or philosophy that could be the original ‘neoliberals’ out from their caves. target has shifted slightly. Perhaps in view referred to as ‘neoliberal’, and nor were British think tanks such as the Institute of the political disaster which was George there any obvious ideologues selling the of Economic Affairs (IEA) and The Adam Osborne’s cutting of the highest rate of virtues of free markets or enterprise. Rather, Smith Institute are returning to some income tax in last year’s budget, the main the backdrop of unregulated, nance-led, of their favourite 1970s tunes, blaming target of the anti-tax movement has shifted global capitalism was just the reality against government for everything, arguing that from income tax to capital gains tax (CGT). A horse, as designed by a neoliberal think tank. which politics and policy seemingly had to only entrepreneurs can save us. In one of happen. the more outlandish examples of this, a Osborne himself had raised CGT from 18% The global nancial crisis has changed that. former Conservative Defence Secretary in to 28% in his emergency 2010 budget. But The intellectual and policy roots of our the British Government, Liam Fox, argued it was only as low as 18% because Alasdair expended, in exchange for relatively small present economic malaises are now thrown in March of this year that a ‘great socialist Darling had abandoned the tapering system increases in tax revenue. CGT, on the other into question, and the practices of elites coup’ was responsible for the depression in 2007, which saw CGT vary between 10% hand, is a far more uid area of policy, (especially in the nance sector) are being of the UK economy, and that only smaller and 40%, depending on how long the asset which allows the Right to become more raked over publicly. The term ‘capitalism’ is government could rescue us. was held for. Income tax is such a politically ideologically exercised and vocal. common currency in mainstream political charged area of scal policy, that politicians debate, in a way that was not true a decade The early neoliberal thinkers of the 1930s are fearful to make very signicant changes. The Adam Smith Institute put out a report ago. How can we throw off the strictures of and 40s were notoriously paranoid about Large amounts of political capital can be attacking the level of CGT in February. 7 SECOND QUARTER 2013 VOLUME 8 ISSUE 1 TAX JUSTICE FOCUS “Neoliberals were always curiously blind to the economic freedom, just as much as socialism. The power of corporations, incumbents, potential for private economic power to constrain nanciers and other entrenched interests liberty.” can seize control of the capitalist system, sapping its energy for their own private gain. But neoliberals were always curiously blind Philip Booth of the IEA wrote a piece The argument levelled by the Right is that to the potential for private economic power for Prospect in the same month attacking a tax such as CGT is holding back an army to constrain liberty. CGT, inheritance tax and stamp duty, as of potential new businesses, all of whom The challenge is to distinguish between what impediments to growth. Then, in a speech are afraid to invest for fear that their assets Labour leader, Ed Miliband, referred to as to the IEA, Fox demanded that CGT be will increase in value and they’ll be robbed the ‘producers’ and the ‘predators’, in his abolished altogether, in order to get the by the taxman when they come to sell 2011 conference speech. There is venture them. The reality, of course, is that Britain economy moving again. While Conservatives capital, that employs qualitative insight into has already suffered from a vast asset price of a neoliberal persuasion like to talk up the technology and science, to support highly bubble, fuelled by cheap credit, in which benets of hard work, they are looking to uncertain start-ups; then there is private ownership of properties and rms became treat the proceeds of speculation, rent- equity, which employs nancial economics governed by a logic that owed everything seeking and asset price ination more to take ownership of a company so as to to their market value, and nothing to the favourably. extract value before returning it to the creation of new value. The mentality of the market. The tax system will never be able nancier infects not only business, but also a While it seems highly implausible that even to make a clean distinction between the a Conservative Chancellor will adopt any of generation of buy-to-let investors, for whom two. But it is a characteristic sleight of these proposals, what is being showcased the promise of home ownership is to be hand on the part of the Right to claim that able to live off rent and equity withdrawal, here is a fundamental oversight in neoliberal CGT punishes ‘enterprise’, when this term rather than anything productive. A society thinking, that was present throughout the has more often been a veiled reference to which valorises capital gain to this extent genesis of the New Right on both sides of nancial asset players. may be even more socially dysfunctional the Atlantic. What Fox et al strategically – than one which valorises income inequality. William Davies is Assistant Professor at the or blindly – elide, in their attacks on CGT, Centre for Interdisciplinary Methodologies, is the distinction between constructive The Austrian economists who gave birth to University of Warwick – www.potlatch.org.uk entrepreneurship and a form of rentier neoliberal thought during the 1920s believed capitalism dominated by asset speculation. that the West faced a straightforward choice, The rhetorical trick of neoliberalism, both between socialist bureaucracy on the one in its long period of exile as a critique of hand, and dynamic entrepreneurialism on Keynesianism and socialism, and in its applied the other. Either there must be the state, phase of the 1980s and 90s, is to or there must be free enterprise. What this use the language of ‘enterprise’ to defend simplistic worldview ignored (but which the freedoms of speculators and asset- their compatriot, Joseph Schumpeter, was strippers. cognisant of) was that capitalism can stie 8.

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