Time is running out to save capitalism from the capitalists

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CORPORATE Britain has a big problem. It has lost the PR wars. Even though firms create wealth and jobs and the tax revenues that pay for the public sector, as well as invent and produce products and medicines that improve our lives, they are, as a group, held in low regard.

I write this with deep regret. Capitalism and free markets are the only way forward, and business and the profit motive a huge force for good – but making that case has been made more difficult by the incompetence and stupidity of many leading firms. Capitalists have become capitalism’s worst enemy. It is a disastrous state of affairs which the companies themselves need to tackle urgently.

The business world has been rocked by fraud, dishonesty and scandal. Some bosses paid themselves rewards for failure. But such factors are not the fundamental driver of UK Plc’s reputational crisis. The explanation is much more mundane.

Think of your own relationship with the large companies you deal with as a consumer. Do you like your energy company? Your retail bank? Your mobile phone company? Your train operator? At best, you will probably have a neutral attitude towards these companies; at worst, you will hate one or more. There are, of course, exceptions. But we all know people who have had a nightmare trying to get a big energy firm to fix their boiler, or who have ended up without a telephone for a month, or have spent months battling the system to get a refund on a cancelled holiday. Dealing with big consumer companies is the bane of most people’s lives. Call centres specialise in wasting time and being useless, unhelpful or incomprehensible. Even changing car insurance can be a nightmare if one isn’t used to all the procedures.

This not a case of big business, bad, small business, good. Giant supermarkets are perceived positively by ordinary customers – outside, that is, of the chattering classes. Estate agents or MOT test centres are rarely the most loved of small businesses.  

The truth, of course, is that the public sector is far worse. But that’s not the point. People have higher expectations of the profit-making private sector, and are more lenient towards “free” state provided services. Voters don’t realise just how much horrendously worse it would be if they had to deal with nationalised monopolies.

They often fail to see that greater competition could do wonders for the price and quality of the service they receive – rail commuters, for example, are at the mercy of a highly regulated monopolist.

In many cases, firms have been able to get away with treating customers shoddily because they operate in uncompetitive markets rigged by government-imposed barriers to entry. As to the energy companies, they are partly to blame for their own mauling. They jumped into bed with politicians, agreeing to embrace expensive green energy, rather than fighting for their customers’ interests; they are now paying the price for their own high prices. In other cases, however, the problem is a broader cultural one.

Whatever the reason, angry consumers are in the mood for punitive policies against an increasingly wide range of businesses, as well as against the people who run them; these taxes and regulations will backfire and cripple economic growth, investment and jobs.  A case in point is Miliband’s preposterous energy price cap.

So what should be done to save capitalism from incompetent capitalists? First, the coalition needs to remove barriers to competition. Second, big companies need a cultural revolution. They need to eliminate errors, provide a much better service and put their customers first. If the supermarkets can do it, so can banks, insurers, broadband providers, airlines, energy companies and everybody else. The stakes are high; if they cannot change, we are all in trouble.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath

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