Robert Colvile sets up a straw person when he concludes, “Let’s stop obsessing about what kind of capitalism we want to have after the crisis and be grateful we have it at all” (“Capitalism is not to blame, it’s our escape route”, May 2). Hardly anyone in the west argues in favour of “socialism with Soviet or Chinese characteristics”. Almost everyone is already grateful we have some form of capitalism. Almost everyone agrees that “it is on the private sector that recovery will rest”.
But there are important differences between national capitalisms. Mr Colvile favours a type close to the existing British model, described as “a rich, sophisticated free-market economy”. In passing he mentions that Germany and South Korea have done better than Britain in coping with the pandemic, thanks to their better health systems. But the contrast goes well beyond health systems. Both states have long undertaken a more entrepreneurial role in imparting directional thrust to the private sector, in contrast to “free market” Britain. The German state, for one, has used state-owned banks (such as KfW) to allocate credit to priority sectors as part of a larger sector-selective technology upgrading strategy — despite economic globalisation, WTO rules and EU state aid laws. There is ample evidence of the entrepreneurial effectiveness of these states. Post-crisis Britain would do well to move its free market model in their direction.
Robert H Wade
Professor of Global Political Economy,
London School of Economics,
London WC2, UK