An eminent Financial Times journalist found himself in hot water when a young group of pluralist economists, including a colleague of mine, Dr Carolina Alves, pointed out that his “recommended reads” were bereft of books by women, as well as being rather Western-centric. In response, they pulled together an alternative reading list, and submitted an open letter to the Financial Times. Their list is well worth a look, alongside the brilliant Diane Coyle’s ‘Enlightened Economist’ list.

To these I will add my own list, including not only those books that hit the limelight last year, but also some that have been a bit more overlooked.

For those interested in why some of us are contrarians while others are copycats, and why it matters to the economy (and not just the stock market), I recommend Michelle Baddeley’s Copycats and Contrarians. For readers passionate about individual freedom, and who want to hear from those marginalised within our society, whose freedoms are trampled on, including by dogooders who claim to help them, then Revolting Prostitutes by Juno Mac and Molly Smith is a must read. And while we’re taking a rest from work, Andrea Komlosy’s Work: the last 1,000 years helps us to reflect on what work is and how that’s changed over time.

If you’re speculating on what the ‘great economists’ would do in response to the many problems facing modern day economies, then take a look at Linda Yueh’s recently published and very readable book on the topic. The great women economists of history – like those today – are shockingly overlooked by the economics profession. Fortunately, Routledge have just published a Handbook of the History of Women’s Economic Thought, edited by Kirsten Madden and Robert Dimand. It is expensive and academically intense, but it is a much needed addition to any economist’s bookshelf.

For a critical perspective on modern day economic thought, try Mariana Mazzucato’s The Value of Everything: Making and Taking in the Global Economy, or Richard Koo’s The Other Half of Macroeconomics and the Fate of Globalization.

Suggested reading

An absence of ethics is driving our mass anxieties

By Paul Collier

Naturally, many authors had much to say about populism, Trump and Brexit, along with reflecting on the global financial crisis of a decade ago. Top picks include Isabel Sawhill’s The Forgotten Americans, Gerald Gordon’s Understanding Community, Economic Growth and Decline, Eric Kaufmann’s Whiteshift, Barry Eichengreen’s The Populist Temptation, Paul Collier’s The Future of Capitalism and Adam Tooze’s Crashed, many of which quite rightly draw on economic history to reflect on the present. And for a longer view, Nick Crafts weaves together the thoughts and findings of a career spent studying the rise and decline of the British economy in his Forging Ahead, Falling Behind and Fighting Back, which spans the Industrial Revolution through to the financial crisis.

It is also well worth keeping an eye on one of the big new trends in development economics and economic history: religion and the economy. Not since Max Weber’s The Protestant Ethic and the Spirit of Capitalism has this area attracted so much interest, particularly amongst economists who have spent years ignoring social and cultural factors. Sriya Iyer, a colleague from the University of Cambridge, looks at India, whilst Jared Rubin’s book, published last year, takes on the Middle East. Looking ahead to next year, Mark Koyama and Noel Johnson’s Persecution and Toleration explores how and why religious freedom developed in the West.

Finally, if you’re looking to start this new year on an optimistic note, I will be sitting down to read, and hoping to draw inspiration from, How change happens by Leslie Crutchfield, after a long and busy year writing my own book, due out in the spring.

Suggested reading

Could Mill's model mend capitalism?

By Victoria Bateman

The latest such attempt is visible in the “shocked” response to a sex worker support group – SWOP – being allowed a stall at Brighton University freshers’ fair. Quoted in The Guardian, feminist writer Julie Bindel argued “This is beyond disgraceful.” Sarah Champion MP took to Twitter to argue that Brighton University were “colluding with organised crime & abusers”. In fact, SWOP was making people aware of a support service for sex workers and handing out free contraception.

This is not the first time that feminists have come down hard on sex work. In the US, recent legislation has made it much harder for sex workers to have bank accounts and to use the web to advertise their services, share information and screen clients. Unlike virtually every other piece of Trump-era legislation, prominent feminists here in Britain have decided that it would be a good idea to import this legislation into the UK. Sarah Champion MP is leading the way.

Read the opposing view

Normalising sex work benefits pimps and traffickers

By Meghan Murphy

In response, sex workers have held protests in Parliament Square. But few people seem to be listening – a bunch of clever women in positions of privilege are ignoring the voices of some of the most marginalised and certainly most stigmatised women in the country. I would be ashamed to be associated with such elitism, hypocrisy and unfairness.

The argument might at first seem innocent: that involuntary sex work needs to be tackled and that by trying to wipe out sex work you can reduce sex trafficking. Not only is this naively utopian and economically illiterate, but those recommending such legislation have failed to listen to and so properly consider the potential effect on voluntary sex workers. Economists Maria Laura Di Tommaso and Marina Della Giusta, for example, who have studied the sex trade for 15 years, found that the risks for sex workers, including of violence, “are higher where prostitution is criminalised”, and that criminalisation makes the detection of trafficking harder to identify.

Those who deny sex workers a voice trot out the same old mantra: that no sex worker is ever doing sex work voluntarily; that, in other words, voluntary sex work doesn’t exist. The arrogance is remarkable: how can any woman presume to know what is going on in the mind of another woman, let alone the many thousands of women who do indeed classify themselves as voluntary sex workers?

The only way that I can imagine another feminist justifying such a position is on the basis that sex work is ‘wrong’. I have no time for such moralism. Not only is it impractical and judgemental, it is elitist and hypocritical: why should I be able to make money from my brain whilst stamping on the livelihoods of others who make money from their bodies? If you think paying for sex is “wrong”, then don’t buy or sell it; it’s that simple. Don’t instead try to restrict the ability for others to choose differently.

More from the same author

Feminism may have won the vote, but it has lost its way

By Victoria Bateman

Before anyone pipes up with the argument that sex workers generate a cost for other women, such as by encouraging men to see women as sexual objects, let me pose a series of questions: would you equally want to stop women from doing cleaning and caring jobs on the basis that it such tasks might, as a result, continue to be associated with women? And, would you stop really clever people from using their brains because it might ‘hurt’ others by making them feel “stupid”? And what about men who do heavy lifting jobs, like removals or white goods deliveries – are we in danger of encouraging the genderised view that men are simply ‘muscle’?

Perhaps the most common criticism of the sex trade is that it encourages the trafficking of women, that it facilitates organised crime and exploitation. But people are also being trafficked to do domestic chores or to work in agriculture, yet no one is proposing to tackle this form of modern slavery by stamping on the livelihoods of people who work in those industries.

The fact that the hypocrisy continues, and ironically under the veil of feminism, is frightening to anyone who, like me, believes in individual freedom and equal respect for fellow human beings. Sex workers should not be excluded from that, they deserve our respect, and they most definitely deserve to be listened to.

Suggested reading

The Left has forgotten what feminism looks like

By Julie Bindel

This doesn’t, of course, mean that we should ignore the issues that drive some women to sex work – we must tackle poverty and women’s lack of opportunities, and in particular the challenges facing single mums. And, yes, let’s tackle sex trafficking. But the way to do all of this is not to stamp on the lives of sex workers. That only makes all of these things worse.

We should always seek to widen women’s options, not close them down. And, at the very least, if you’re going to do the latter, admit that it is on the basis of your own moralism – of what you would or would not want for your own body. Don’t try to hide under the veil of feminism. No one who honestly believes in the feminist phrase “my body my choice” should be ignoring the most marginalised and stigmatised group of working women in our society.

It is time to revisit Mill’s central philosophy: that it is possible to both support and protect individual liberty through the free-market system, while at the same time addressing social injustices. It is possible to create a freer and fairer capitalist society.

More from this series

John Milton: smug liberal and free-speech warrior

By Polly Mackenzie

Almost impossible to place on the political spectrum, Mill’s inability to fit neatly into any of the usual political pigeon holes has, sadly, meant that his work (some of it written with his wife, Harriet Taylor Mill) has been neglected. Writing at a time of immense poverty and inequality, and yet also restrictive Victorian moralism, Mill sought to make capitalism work better, rather than to replace it.

Mill believed in the power of the market – in the benefits of competition and the individual liberties it helped to uphold – and was skeptical of the state, along with revolutionaries who, in his words, had “serene confidence in their own wisdom on the one hand and a recklessness of other people’s sufferings on the other”. Today’s relevance is clear.

Mill’s agenda for improving capitalism was two-pronged. The first and best known was increasing personal liberty, as set out in his book On Liberty. He believed that social injustice could in part be addressed by making sure that people were freer to take advantage of the opportunities of life. The second (and lesser known) prong was Mill’s theory of the mind: his recognition that we sometimes go along with things without properly thinking about them, but that through education and reason we have the potential to change our mind, and in a way that enables greater individual liberty alongside greater social justice. Central to this was how we could reconcile our own individual self-interest – that desire to be free to do our own thing – with the interests of society.

While many economic and politic thinkers suppose that our own selfish interests are fixed and unchangeable, Mill disagreed. For Mill, reconciling individual and social interests can in part be achieved by getting people to think and question, rather than leaving it to the state to force people to do things for the “good of society” that they feel are against their own interests. This, he believed, resulted in an unnecessary trade-off between individual liberty and society.

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Aristotle's answer to identity politics

By Henry Olsen

Born into and educated in the “utilitarian” tradition – one that sought the greatest utility (or happiness) for the greatest number – Mill had an epiphany moment in his early twenties that triggered a six-month period of depression. Asking himself whether the ultimate achievement of a utilitarian reorganisation of the world could make him personally happy, his answer was ‘no’.

While utilitarians focused on rearranging the outside world, Mill argued that we also need to think about the world inside our minds. Bringing romanticism to bear on utilitarianism, and no fan of Victorian moralism, he adopted the idea that the human mind is embedded in culture and history – that much of what we do, think and value is shaped by something other than reason, and can, as a result, be reshaped by its application, making us happier as individuals and as a society. Perhaps the best example is his argument that women’s subservience was not “natural” but was instead the result of unequal liberties (e.g. unequal voting rights, property rights and education) that were blindly accepted because of societal conditioning. Mill believed that “[t]he despotism of custom is everywhere the standing hindrance to human advancement”.

In The Subjection of Women Mill reasons that fighting the attitudes and laws that render women second class citizens is not only good for women, but is in the best interests of everyone – that men will have more personal fulfilment when they associate with women as educated equals, and that equality in the home conditions us to be democratic rather than autocratic. He also suggested that equal liberties for women would help reduce population growth, thereby increasing wages and helping to achieve greater equality (he was, in fact, arrested as a young man for helping women access birth control).

Further reading

Capitalism is the best guarantee of individual freedom

By Victoria Bateman

This is an example of his two-prongs at work: how supporting individual liberty alongside encouraging reasoned argument can help deliver a world in which there is both greater individual freedom and lower levels of inequality. For Mill, the “emancipation of women and cooperative production, are…the two great changes that will regenerate society”. We have made great strides towards the former, but what of the latter?

This brings us to the third part of Mill’s agenda for reforming capitalism, one that receives even less attention than his theory of the mind, yet has particular relevance to today. Mill was a big fan of the competition, experimentation and diversity that free markets supported, and crucially believed this extended to the form of business organisation itself. He did not see the future as being one of capitalists versus workers: firms in which workers receive wages and capitalists the associated profits. Instead, he anticipated a future that involved an “association of labourers with the capitalist”, or an “association of labourers among themselves” in the form of worker cooperatives.

While communist revolutionaries (then and now) suggest that a fairer future hangs on the expropriation of property from private hands – the nationalisation of “the means of production” – Mill offered an alternative. His was a model that avoided expropriation, where new firms would instead develop to challenge older style firms – new firms in which workers were given shares, or firms that were composed entirely of workers working together in the form of cooperatives. For Mill, such firms had the possibility of being even more successful than traditional capitalist firms, as they would motivate workers (who would now receive a share of profits) and would result in better labour relations, avoiding the angst associated with more traditional firms. As a result, the advantages of the market are maintained, but with a more equal distribution of private property: individual liberty with greater social justice.

More from this author

Capitalists – not socialists – are killing capitalism

By Victoria Bateman

For Mill, capitalism would naturally evolve in a way that made this new style of firm inevitable: as wages rose, on the back of women’s liberation (which would slow population growth), he believed profits would fall, reducing the prospects for the older style firm and giving workers more savings to invest in new style enterprises. So far, history hasn’t exactly borne this out – despite, at least in the UK, politicians championing cooperative and mutual business models. And yet with the share of income going to capital increasing at the expense of labour, the idea of workers sharing in the profits should be an attractive one to those seeking to rebuild public faith in capitalism.

Why, then, has Mill’s idea not taken off? Was he wrong that share ownership for workers (or full-scale worker cooperatives) results in better companies, ones that outcompete older style ones and so naturally become the future? Or, are there stumbling blocks in the way of alternative models of business, such as the hold of existing business forms, together with inadequate human and physical capital for challengers? Today, if we are serious about maintaining markets, but at the same time having a fairer distribution of private property, these are questions we should be considering.

In the charged, post-crash era we are living through it is easy to blame capitalism for our ills. But abandoning the free-market model means enabling greater state intervention, and history shows us that leads to less individual freedom – to a “recklessness of other people’s sufferings on the other”. Mill understood this, and provided a middle way.

Today, with the dark side of capitalism once again on display in vast wealth inequality, stagnating wages and cronyism, we are again associating money with immorality. As a result, Marxist thinking is on the rise and, so too, it seems, are the anti-capitalist pronouncements of the Church. But to reject capitalism as immoral is a mistake.

It was the 18^th century political economists David Hume and Adam Smith who turned the idea of the immorality of markets on its head. Hume argued that without the desire to acquire ever greater riches, we would be idle.[1. Backhouse, 2002] In pondering how economies developed from hunting and gathering to factories, offices and new technologies, Smith suggested that the market harnesses selfishness and channels it in a direction that works in the best interests of society. The natural harmony of the market would translate individual desires into a wider social good. In his own words, “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”.

Suggested reading

Capitalists – not socialists – are killing capitalism

By Victoria Bateman

Smith also believed in the power of the market beyond its money-making power. His Theory of Moral Sentiments placed individuals in the context of a wider society, and brought morality to bear on self-interest. He saw the pursuit of individual life ambitions, not the maximisation of riches, as the key goal in life.

By using the market, he argued, we can more easily and cheaply meet our material needs, but that would also leave more time and resources for us to fulfil whatever non-material goals we may have. Rather than the Church imposing its own view of what our goal should be in life, Smith believed we should answer to our inner selves – to an “impartial spectator” that sits inside each one of us. That is the freedom markets provide, and why accusations of immorality are misplaced.

Here are four reasons why a defence of markets is a defence of much more than money.

First, as Adam Smith well knew, the prospect of profit encourages us to solve problems and meet the needs of our fellow citizens, making our lives longer, less arduous and more pleasurable – just think of the life-saving drugs, the household appliances and the technological devices we take for granted. Markets mean that we are incentivised to care about each other much more than we otherwise would. How else does the capitalist make money but by serving the consumer?

Second, by connecting people across distant lands, and from different backgrounds, markets encourage tolerance. To quote Voltaire: “Go into the London Stock Exchange… and you will see representatives from all nations gathered…Here Jew, Mohammedan and Christian deal with each other as though they were all of the same faith”.[2. Quoted in Postell et al, 2011] Markets are the enemy of intolerance. Markets thrive off diversity.

Third, markets allow us to escape social practices which are exploitative. For centuries, communities have persecuted or abused ‘non-conformists’ and the vulnerable – burning certain women as witches, mutilating women’s genitals, breaking the toes of young girls in order to bind their feet, oppressing the LGBT community and those considered “second class” on the basis of the colour of their skin. For those who see society as something other than a happy and harmonious place, the market provides an escape mechanism. Markets provide us with the ability to be financially independent. They allow us to engage with one another anonymously – in a way that ensures we are fed and clothed without having to acquiesce to another’s world view.

Fourth, while the competition which markets enable might on the one hand encourage selfish behaviour, it also weeds out immorality. With competition, individuals are, in general, better able to escape individual cases of abuse or mistreatment compared to a situation in which there is one sole employer, the state.

The film The Lives of Others, which follows a group of young intellectuals in communist Berlin in the early 1980s, highlights just one individual story of abuse, whereby a senior official uses his power to sexually exploit women, demanding favours in return for overdue promotions. Without competition to expose them, the state can cover-up wrongdoing, meaning that abuses continue. Indeed, the state has an incentive to do so (much like the Church), precisely in order to hold on to its reputation for the “social good”.

More from the author

Capitalism is the best guarantee of individual freedom

By Victoria Bateman

In the marketplace, while cover-ups can and do happen, competition pushes in the direction of rooting out wrongdoers. Where poor practice, even abuse, is taking place, consumers can exercise their choice to move to another provider. Workers can also move to another employer. Of course, the mechanism for this to happen is far from perfect – consumers do not always find out the full facts and workers facing abuse are not always mobile – but at least markets provide the possibility of punishment and escape that is missing when the state has a monopoly of power, and, importantly, a monopoly of force.

There is, however, a caveat: markets can be made more (or less) moral. As Steven Pearlstein wrote in the The Washington Post under the headline: “Is capitalism moral?”

“[T]he way markets distribute rewards is neither divinely determined nor purely the result of the ‘invisible hand’. It is determined by laws, regulations, technology, norms of behavior, power relationships, and the ways that labor and financial markets operate and interact. These arrangements change over time and can dramatically affect market outcomes and incomes…In our current debate over capitalism, too much attention is focused on whether, how or how much to redistribute the incomes that markets have produced, with too little focus on the institutional arrangements that determine how that income is divided up in the first place.”

This notion – that there is no single, divinely determined market outcome – is now commonly associated with the Left-leaning idea of ‘Predistribution’. However, Classical Liberals were well aware of the way in which market outcomes depended on the foundations on which they were built. Academic Valeria Mosini argues that Leon Walras, 19^th-century economist best known for his mathematical proofs of the benefits of markets, had a much more nuanced view of markets than he has been given credit for.[3. Mosini, 2012] While he argued that the market worked well, he pointed out that the outcomes depended on the context.

In thinking about the appropriate backdrop for markets, these early economists confronted numerous questions about what is or is not “fair” (as well as what is or is not efficient). This included debating laws on bankruptcy, the responsibilities of central banks, whether the state should guarantee our savings, whether owners of stocks and shares should be personally liable for the debts of the companies they invest in, and whether inventors should be able to patent their ideas. The ‘Institutional School’ of J.R. Commons went on to make the now largely forgotten point that institutions – the rules of the game which we choose to construct for markets – reflect what society thinks is right or wrong, which can have big implications for class, gender and race.

All of which means that markets can be redesigned to work ‘better’ – to deliver more equitable and environmentally sustainable outcomes. But in redesigning markets, economists and policymakers cannot escape what society deems to be ‘good’ or ‘bad’ – what we deem legal to buy and sell (sex for example), and the types of incentives we choose to put in place for market actors, such as through discrimination law, taxes, subsidies, and regulations.

It wasn’t that long ago, after all, that economists argued against (rather than in favour of) equal-pay-for-equal-work legislation on the basis that women have vital work to do within the home and that equal pay would disincentive such work. Their thinking was muddied by a moral code that concerned what people ‘should’ or ‘should not’ be doing. Society is always the limiting factor in market design. As society advances – often as a result of the very freedoms that markets support – the rules of the market must be redesigned.

The market is far from perfect, but it must be understood in the context of an imperfect society, one which becomes worse when cloaked in the heavy hand of the state. The market is much more moral than we today like to think. When Mandeville’s Fable of the Bees attacked puritan values in 1714, questioning the commonly held notion that it was Christian morality that “held society together” and suggesting that private vices can in fact be to public benefit, there was an outcry.

Individual freedom could not have been seen as more radical – leaving people to their own devices, it was thought, would wreak havoc. Today the failings of capitalism are the failings of society to effectively design the rules of the game. Markets are not the problem; the problem is the actors that shape them.

Suggested reading

Too many of crony capitalism's rich don't get poorer

By Charlotte Pickles

In the very same way that Marxists argue that capitalism leads to the exploitation of the poor, Marxist Feminists argue that capitalism leads to the exploitation of women. In 1986, Maria Mies penned what was to become a classic work. Titled Patriarchy and Accumulation on a World Scale: Women in the International Division of Labour, she argued that capitalist production depends upon cheap female labour, not just within factories but also within the home.

Silvia Federici, in Caliban and the Witch, went further, suggesting that capitalism relied on violence – against women, the poor and ethnic minorities – in order to create a class of landless labourers who were entirely dependent on capitalists.

As the world has gone global, Marxist feminists have highlighted the way in which professional Western women rely on the labour of poorer women on the other side of the world, whether indirectly in the form of cheaply produced clothing and household goods or directly in the form of cleaners and nannies – and even surrogate mothers.

Philosopher and feminist Nancy Fraser argues that pro-market feminists have engaged in a “dangerous liaison” with capitalism. They have shackled themselves to a system in which inequality is preordained, and so shouldn’t be surprised that the “gender gap” in all of its many dimensions is yet to close. Marxist Feminism, in other words, suggests that the strategy of “lean in” will never be enough; that women need to “lean out”.

Suggested reading

Feminism may have won the vote, but it has lost its way

By Victoria Bateman

While capitalism is, of course, far from perfect, for me the idea of replacing capitalism with an opposite kind of system could not be more terrifying. The bright red revolutionary posters of the Soviet Union depicting healthy and strong factory women may give a positive impression, but in practice, alternatives to capitalism place greater power in the hands of the state and society. These are two bodies that history has shown provide no guarantee of women’s freedom, something John Stuart Mill recognised:

“Society can and does execute its own mandates: and if it issues wrong mandates instead of right, or any mandates at all in things with which it ought not to meddle, it practices a social tyranny more formidable than many kinds of political oppression.”

For those, like me, who see society as something other than a happy and harmonious place – as something that can potentially constrain us and restrict our freedom – the market provides an escape mechanism. It is not competitive markets that have been the greatest enemy of women over the course of human history; it is social norms.

Suggested reading

Capitalism is the best guarantee of individual freedom

By Victoria Bateman

Economic historians Jan Luiten Van Zanden and Tine De Moor point to the way in which women’s involvement in the labour market in medieval Europe led to substantial changes in family life that empowered women, including providing them with the ability to escape early marriage, ultimately laying the foundations for economic growth. Historian Amy Froide in her recent book Silent Partners points to the way in which early financial markets in Britain before and during the Industrial Revolution provided opportunities for women that had been denied by incumbent societal practices and institutions.

Not only do markets allow us to escape the norms of society, the greater competition provided by the market also adds a further release valve: it means that individuals are, in general, better able to escape individual cases of abuse or mistreatment than a situation in which there is one sole employer, the state.

While by human nature “bad apples” are inevitable, they are more likely to face the consequences of their actions in the marketplace than they are in any state-run economy. Without competition to expose them, the state can cover-up wrongdoing, meaning that abuses continue. In the marketplace, while cover ups can and do happen, competition generally – and eventually – roots out wrongdoers. Either consumers get wind of it and stop buying a particular producer’s goods, or workers move on to another producer. While the mechanism for this to happen is not perfect, at least it provides a possibility of punishment and escape that is missing when the state has a monopoly of power – and, all importantly, a monopoly of force; one which enables it to imprison or even kill those who speak out.

The recent edited volume Women’s Experiences of Repression in the Soviet Union and Eastern Europe highlights the brutal and dehumanising way in which women were treated when they dared to disagree with the state or were simply seen as being an obstacle to the “wider good”. According to Orlando Figes’ estimates, one-eighth of the Soviet population were the subject of direct and state-sanctioned repression over the period 1928-53, amounting to 25 million people. Half a million people alone were deported in an effort to eliminate “anti-Soviet” sentiment.

Ultimately, it is not capitalism that is the problem for women; it is society and a state that comes to embody patriarchal social norms.

Read the opposite view

Can capitalism ever be good for women?

By Vicky Pryce

Mary Wollstonecraft, arguably the author of feminism, set these principles out in the 18th century, as she dedicated A Vindication of the Rights of Woman to the former Bishop of Autun:

“Consider, I address you as a legislator, whether, when men contend for their freedom, and to be allowed to judge for themselves respecting their own happiness, it be not inconsistent and unjust to subjugate women, even though you firmly believe that you are acting in the manner best calculated to promote their happiness? Who made man the exclusive judge, if woman partake with him the gift of reason?”[1. ‘A Vindication of the Rights of Woman‘, Mary Wollstonecraft, 1972, page 103]

In making the case for equal rights, Wollstonecraft draws directly upon both reason and self-interest. She argues that women are capable of thinking for themselves and should, therefore, be able to make their own decisions, rather than being under someone else’s thumb.

For centuries, the masses – and not only women – had been unable to pursue their own self-interest, as selfishness was seen as “evil” and “disorderly”. Showing that this was not the case was, of course, how big thinkers such as Adam Smith and J.S. Mill transformed political economy, pushing the state and religion out of the way, freeing individuals to be themselves. Wollstonecraft was doing the same.

But despite its liberal roots, feminism today is making two mistakes. It too often embodies the centuries-old “we know best” attitude that Wollstonecraft was kicking against, as well as a more modern “you’re bad for the sisterhood” which she would have abhorred. That’s no more the case than when it comes to women who make money from their bodies: sex workers, Page 3 girls, female hostesses and grid girls.

While making money from your brain is to be celebrated, making money from your body is not, apparently. Modern-day feminism is looking more and more like a group of “clever” women ganging up to pull the rug from under the feet of other women. Women who monetise their brains are denying other women the ability to monetise their bodies. It’s elitist, unfair and hypocritical.

The justification for their approach is two-fold.

Firstly, these neo-feminists claim women have been “socialised” to want to objectify themselves and so do not know what they are doing. In a different – more equal – world, they would not “choose” to reveal their bodies and parade around in high heels, and so, for their own good, should be denied the opportunity to do so in the real world. Perhaps they assume that their entreaties will, given time, generate an epiphany moment. These women, no longer able to make a living, will be grateful and start training to become accountants, politicians and lawyers instead.

I have been the subject of this “we know best” attitude myself. Last year, when giving a public lecture at a new research forum in London on the subject of society in the 1960s and how far we have come since, I chose to walk on stage and address the audience in a cutting edge piece of feminist fashion by the designer Jenna Young.

It was a sheer black bodysuit which I wore to provoke questions about women’s bodies. I thought it would be an interesting test of how far society had come in terms of women having freedom to do whatever they want with their own bodies – thereby fitting neatly with the theme of my lecture.

Not long afterwards, I noticed that the accompanying lecture delivered at the same event by a well-known and well-respected male colleague, who wore his usual suit, had been made available online. Mine had not. I was later told that a couple of attendees believed I was objectifying myself. They claimed to be feminists. My voice was, as a result, wiped from the face of history.

This reflects the attitude of many present day feminists: that whatever an individual woman chooses to do is irrelevant. She is deemed not to know her own mind; not to know what is best for her. Whether I think I am objectifying myself is beside the point; what matters is what someone else thinks – and their thoughts are enough to constrain my freedom.

The other justification given for denying individual women the right to do what they want with their own lives – and their own bodies – is that their choice has negative consequences on the rest of the sisterhood. If you choose to monetise your body – or, simply, to go about your daily business in an outfit that is perceived to be “too revealing” – that choice causes men to look at all other women in a particular way. Essentially, they are saying that the objectification of women is women’s own fault and the only way to stop it is for women to keep their “sisters” in line (needless to say that I disagree).

As we mark 100 years of having a voice, perhaps it is time for feminism to think about where it came from and  embrace again individual freedom for all women – not just for the “clever” ones.

Right now, our political and business bigwigs are in Davos to do some head scratching and glad handing. They seem to appreciate the scale of the problem. But do they have the understanding needed to help bring about the right sort of change?

Well, if sex were irrelevant for economic growth and inequality, there might be reason to be upbeat. For not only does Davos represent a concentration of riches, it does also attract some of the brightest people in the world. If they can’t get to grips with the underlying causes of our present situation, there isn’t much hope for the rest of us.

However, our understanding of the forces which shape the global economy has, for too long, been limited. Limited by a story of the past which sees men as the wealth creators, and class as central to how the resultant pie is distributed. It is a story that locks out women, sex and reproduction.

It’s time for Davos Man to move over. While the importance of gender equality for economic growth is starting to gain traction, it is much less common to join the dots between gender and income inequality. Probably because doing so requires a conception of freedom that goes beyond the male-centred one that developed with the political philosophy of Locke. We cannot understand either economic growth or inequality unless we pay attention to that vital difference between men and women: women give birth. It is those births that in turn create the labour supply that feed into the wider economy.

Modern economics, however, typically explains rising inequality through a combination of the “two T’s” (technology and trade), with those in more radical quarters, from Stiglitz to Piketty, highlighting the role of the state. Sex does not get a look in.

Yet it was Western society’s ability to control births, via late marriage, that created a high-wage economy in north-western Europe, and in turn incentivised mechanisation and economic growth. Once birth control methods improved and diffused in the 20th century, the economy could push even further in this direction.

But in large parts of the world, women have little control over the bodies. High fertility rates, particularly in places where child brides were common, meant that global population ballooned. And this population expansion happened at exactly the same time that the West and “the rest” came into direct contact in the form of globalisation.

Through outsourcing and immigration, the ballooning cheap labour became increasingly accessible to Western businesses. With it, Western wage growth suffered, economic growth stagnated and inequality widened. If we can improve the position of women and girls in poorer countries, and increase their wages, many of the problems facing richer economies will naturally resolve themselves.

That’s not about standard pro-market rights-based packages, or socialist class warfare. It’s about putting women’s reproductive freedoms first – something heavily-male dominated economic institutions such as the World Bank and the bigwigs of Davos fail to see.

But what about society? One of the most noticeable aspects of the period which gave rise to neoliberalism was a social revolution. Rapid social change culminated in dramatic changes in the law affecting homosexuals, ethnic minorities and women. Individual liberties were front and centre.

The dip in support for capitalism today has, as in the 1970s, similarly been explained in economic terms – a dissatisfaction with rising inequality and with the after effects of the global financial crisis. If capitalism is to regain its popularity, it must, however, re-find its social roots.

Social and economic freedom go hand in hand

In the words of Jason Hickel and Arsalan Khan:[1. The Culture of Capitalism and the crisis of Critique, Anthropological Quarterly, 2012]

“The hallmark of the [social] revolution of the 1960s was the defence of individual liberty against the constraints of mass conformist society. Resistance to the draft; the defence of free speech; the right to divorce, abortion, contraceptives, and other sexual freedoms all references the desire to make choices for oneself, through one’s own reason and according to one’s own conscience.”

A growing army of students and academics – particularly those involved in the 1960s counter-culture movement – employed the writings of Durkheim and Freud to highlight the potential antagonism between the individual and society. While individuals were fighting for the freedom to be themselves, the political economy of the day was dominated by a heavy-handed state. As a result, anti-authority feelings grew.

This fight for social freedoms paved the way for greater economic freedom. Within little more than a decade, the state interventionism of the 1960s was overhauled. Keynes was out and Milton Friedman was in.

In his book Capitalism and Freedom, Friedman argued that political and economic freedom are inextricably linked; that:

“a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom”.

He understood that society – much like the playground – was not always harmonious and as such there was the risk of conflict between society and the individual. Friedman argued that the market could ease the resultant tension, allowing us to engage – through the market – anonymously, without having to agree with one another. The result was that we could all live side-by-side and meet our daily needs in a way that avoided the enforced conformity that communism would involve. In his own words:

“…a major source of objection to a free economy is precisely [that]… it gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity…Each man can vote, as it were, for the colour of tie he wants and get it; he does not have to see what colour the majority wants and then, if he is in a minority, submit…By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power.”

Winning back support for capitalism means going beyond economics 

In the current climate, dry economic arguments in support of capitalism will persuade some of the merits of free markets, but they will not convince the majority. For many, their lived experience – stagnating wages, inequality, insecure employment – tells a different story. Today’s anti-capitalist feeling is set against a background reminiscent of the 1930s, when, on the face of it, capitalism seems not to have delivered.

Winning back support for capitalism therefore requires its advocates to go beyond economic arguments – to engage at a human level with the tension between the individual and society. That could not be more fitting for the age of Trump and Brexit, a time which has revealed deep social cleavages and disagreements.

The weakness of the hard Left is as much social as it is economic. The rise of neoliberalism, and the long decline of socialism from the 1970s onwards, was not merely as a result of ‘screwing up’ the economy, but a consequence of treating the ‘working class’ as a homogenous whole. In obsessing over class conflict, they ignored all other tensions. They were, in short, happy to sacrifice individual freedom in the name of doing what the socialist state – not the people – thought was best for the majority. The hard Left saw no inherent differences between individuals (other than on the basis of income), they treated everyone as if they were carbon copies, happy to be manipulated so long as the state could in return guarantee food, shelter and clothing.

Individual difference is, if anything, even more celebrated now. People do not want to be pawns in some five-year plan. To quote Hickel and Khan, neoliberals “made the moral case that beneath all acts of regulation lurks hubris and elitism – the desire of technocrats to manipulate the masses”. People want to be free to take charge of their own lives – to, quite simply, do as they please and to be themselves. Individual freedom: that is the true value of free markets – and it’s the argument capitalists need to make.

And here I don’t mean to point to the usual stories involving sex trafficking and abuse, but the (sadly) undereported story that is the state’s consistent failure to provide basic market support that, in turn, condemns sex workers to a life that is significantly more dangerous than would otherwise be the case.

A lack of recognition of sex work (as a career like any other) means that sex workers are consistently being persecuted by the authorities rather than given the basic legal and social insurance footings that any other form of work offers. This marginalises sex workers and leaves them vulnerable to abuse – not only from clients but from the authorities themselves, with the latter making the former more likely as sex workers have nowhere to turn.

I have little patience for moralistic attitudes that have resulted, for centuries, in politicians brushing the issue under the carpet. Sex work has existed since markets were first created and it’s not going away anytime soon – in fact, demand is growing. To moralise is not only to ignore some of the most vulnerable workers in our society but to actively make the choice to leave them in a much more precarious position.

It’s time we not only put the practicality of sex workers’ lives before our own moralism but that we also dig deep within ourselves to ask why we respond in the way that we tend to do as a society. That may have something to do with the way, historically, a woman’s virtue has been tied to sexual purity… the way in which we fear women being in control of their own sexuality.. and the sense in which, since the Enlightenment, we have lifted the brain to a position that is superior to the body.

For readers wanting to explore more I recommend my piece for Times Higher Education – “Prostitutes need the help of economists to argue for the rights and protections that other workers take for granted“.

***

Introduction to this Under-reported series.

Summary guide to all under-reported articles in this series.

You won’t, however, find many ‘goddesses’ in modern day economics.

When I first studied economics, as a sixteen-year-old at Oldham Sixth Form College, I was one of only three girls in my class. When I got a place at Cambridge, I was, again, in a female minority. Things are little different today. For every three men studying economics at degree level in the UK, there is only one woman. In the US, where only 13% of economics professors are female, it is little better. And, unlike in the sciences, things are not improving with time. In fact, the proportion of women studying economics here in the UK has been falling rather than rising.

Does the gender disparity in economics matter? Isn’t a good economist a good economist, regardless of whether they are male or female? Many economists, after all, presume that economics is inherently ‘gender-neutral’ and that the lack of women hasn’t caused a problem. The assumption is that the problem is not with economics; it is with women. That women are just not interested.

The evidence otherwise, however, is becoming increasingly difficult to ignore – the problem is not with women, it is with economics. And the implications go way beyond the gender balance; it’s skewing the way we see the world. More women in economics could make the study of economics much more relevant to the real world.

The lack of women blinds economics to critical issues

Male and female lives have historically been very different. So it’s inevitable that a subject that is so heavily male dominated has neglected things that are essential to a complete understanding of the real-world economy but are, at least historically, predominantly concerns of women. Unlike production and paid work, the vital role of reproduction and care, along with the reality of dependency, have been under studied.

Economists divide the world into two spheres – the market and government. It is an over simplification that misses vital human behaviours. While economists have been happy to take an imperialistic tone with sociologists, applying economic models to explain society, from marriage to crime, they have learnt little in return about the way society might affect the economy.

Life outside of markets – life in the family, community and society – can have powerful effects on the economy, but has been largely neglected. And areas of study that were traditionally included in economics, such as history, society and ethics, have long been pushed to the side as either unnecessary or too ‘soft’. In these terms at least, economics was in a better state in the hands of Adam Smith and David Ricardo, two centuries ago. It has moved backwards rather than forwards.

Economics has an image problem 

Economics has gone wrong in part because the cumulative lack of women in economics has resulted in crucial dimensions of life being left out of economists’ understanding of the world. If the profession is going to attract more women, and thereby provide a more accurate view of the world, it needs to deal with the behaviours and perceptions that put women off.

Recent research by University of California student Alice Wu, which applied a sophisticated algorithm to analyse over a million online comments posted on a website commonly used by young economists, found that the words most used in relation to female economists included “hotter”, “hot”, “sexy”, “pregnant”, “gorgeous”, “beautiful”, “tits”, “lesbian”, “date”, and “horny”. These discussions about female economists contained 43% less professional content and 192% more personal or physical content than discussions about male economists.

The sexism does not surprise me. Not long after I first started teaching, I had a problem student. I discussed it with a senior teaching colleague, who told me that the issue was that I was a young woman teaching mostly male students. The problem was, in other words, me. For being female. Is it any wonder women are put off?

Even aside from the sexism, economics has a serious image problem. The profession is seen as the natural home of greedy and selfish people who are interested in one thing: money. You know, the kind of people with dreams of becoming mega rich through careers in banking or at the top table of global corporations.

Yet the reality is that economics is about so much more than that. It asks and, more importantly, seeks to find the answers to, big questions that affect all of our lives: Why are some countries, and some people, rich whilst others are still poor? What are the causes of boom and bust? What is the role of government? How much should we all be taxed? How should schools and hospitals be funded? How do we reconcile our desire to consume with the health of the planet?

The questions go on. The idea that women are ‘just not interested’ in economics could not be more misguided. The problem is more that economics conjures up a bad image, an image that it desperately needs to shake off.

I have been trying to do what I can to help turn things around. Back in 2015, I introduced an annual ‘Women in Economics’ day, held at the University of Cambridge, aimed at young women between the ages of 16-18. Female leaders from across business, policy and politics have supported the initiative, including Carolyn Fairbairn, director-general of the CBI; economists Kate Barker and Vicky Pryce, Labour MP Yvette Cooper and couture fashion designed Jenna Young.

For years economics has devalued anything that has traditionally been seen as ‘feminine’ and revered all those things traditionally seen as ‘masculine’. It has been obsessed with production, paid work and government, ignoring reproduction, caring activities and society. It has been happy to assume reason always trumps emotion, and that we are each free and independent, when in reality dependency and social constraints are a fact of life for many. And, it has valued maths above every other approach to the study of the economy, including what history has to tell us. Until this macho hang-up changes, economists’ models of the world – models that inform the decisions made by policymakers, and in turn affect all of our lives – will continue to be half-baked.

All these problems have a common cause that economists have so far failed to grasp: the crisis in care. Care is that concern which distinguishes us from robots. It’s what leads us to make decisions that otherwise look irrational. And, frustratingly for researchers, it’s really tricky to capture.

But what goes on in the public sphere – that pay gap, that growth slowdown – cannot be understood without first understanding care. Which means we can’t understand what goes on in the public sphere until we understand life at home.

A short history of care

For centuries the household and the workplace were often one and the same thing, blurring the boundaries between production and reproduction. With the Industrial Revolution, ‘work’ shifted out of the home and into the factory. New industries and new technologies favoured a combination of brute strength and capital – as famously depicted in the murals of artists like Benton. The Male Breadwinner Model was born, and alongside it, the ‘feminisation’ of the home: men earned and women cared. Production was remunerated in money, whilst reproduction was remunerated in social esteem and virtue. And when women did work outside the home, such as in the “dark satanic mills” of the Greater Manchester cotton industry, commentators decried the “destruction of the family” and the de-feminisation of women.

Karl Marx, famously not a supporter of women’s equality, lamented the loss of free domestic labour that women’s labour market participation represented. Dr Hawkins, factory surgeon and inspector, noted in 1833 that the working wives of the industrialising cities “fall remarkably short of the usual characteristics of the English wife”. Those women were not fulfilling their domestic duties “no cookery, no washing, no making, no mending, no decencies of life, no invitations to the fire-side.”

“Family wages for men” was the trade union cry, and by the middle of the twentieth century, the separate spheres of production and reproduction had been crystallised by the state. Rather than using growing tax-revenues to support women’s re-entry into the workforce by ‘socialising’ care, policy measures were built on the assumption that women were housewives, like the daily school timetable which made anything other than part-time work near impossible or pensions which rewarded male wages more than female ones. But by the 1980s, the marriage of liberal feminism with pro-market thinking resulted in the double-earner family, which contracted out care to an army of low-wage cleaners and nannies, often from overseas.

This marketisation of care has not, however, provided a complete solution, particularly for families who cannot afford to purchase care through the market. The great contradiction of capitalism, as academic Nancy Fraser has shown, is that it both requires care but also makes its provision increasingly difficult.[2. Nancy Fraser, ‘Contradictions of Capital and Care’, New Left Review, 2016]

Economic models have failed to take account of care

The public sphere is only as strong as the private foundations upon which it is built. That’s the lesson behind the famous feminist saying: ‘personal is political’. Addressing the numerous problems in the economy means breaking down the traditional division between the home and the public sphere, because, as feminist economists such as Marilyn Waring and Nancy Folbre have pointed out, production in the market depends on care within the home.[2. Nancy Folbre, The invisible heart – economics and family values, 2001; Marilyn Waring, If Women Counted, 1988] ‘Personal is political’.

Yet the mathematical models so beloved of economists fail to recognise this. Instead they rely on the notion that private individuals make rational decisions about how much to work and what to spend their earnings on. It is like a science fiction world in which we are all robots – there is no love, no sex, no power and no emotions. We are assumed to be economically active and to have no dependence on – or responsibility for – anyone else.

But we are not robots, and care is vital to our existence. Not just in childhood and old age, or even in times of illness, but through the care we receive from our loved ones every single day. It is care that reproduces the human race, that sees us through periods when we are most vulnerable and that makes the daily grind just about manageable.

While economists focus on independence, individualism and reason, care involves the polar opposite: dependence, relationships and emotion.[4. Susan Himmelweit, ‘The prospects for caring’, Cambridge Journal of Economics, 2017] Altruism, reciprocity and responsibility for others all feature. The economic model upon which policy decisions have been taken is highly flawed, and that has led to a crisis in care.

The Crisis of Care is a barrier to economic and social progress

The economic gains from women’s (re)entry into the workforce over the past century cannot be understated, in fact estimates suggest further great gains if that trend continues.[1. Citi Group Report, ‘Women in the Economy II’, November 2017] However, as women have entered the workforce, the care gap that has opened up as a result is creating daily stress and strain in the lives of so many working families.

It can be seen in the double burden women carry in working and providing the vast majority of care within the home. Which is both hindering women’s ability to achieve greater equality in the labour market and leading to the increasing health problems we see related to the stress of juggling care and paid work. In the UK, according to the British Social Attitudes Survey the typical woman spends 36 hours a week on unpaid work in the home, compared to 18 hours for men.[2. Jacqueline Scott and Elizabeth Clery, ‘Gender Roles: an incomplete revolution’, British Social Attitudes 30, 2013]

And this failure to factor in care needs, and therefore develop adequate market or public-sector solutions, is contributing to fertility rates falling below population replacement levels – the result of a ‘baby strike’ as women reject that double burden of earner and domestic caregiver.[3. Victoria Bateman, ‘The coming pressure on professional women’, Bloomberg View, 2016]

It also risks increasing inequality between poorer and richer women: richer families can contract care out in a way that poorer families cannot afford to.

The social and economic impact of the failure to value care, to anticipate the care gap, and to plan accordingly can also be seen in the care industry itself. Care has historically been undervalued – taken for granted – and so, when provided through the market, has been relatively lowly paid. And the inherent difficulty in raising productivity in a sector so dependent on personal interactions, so labour-intensive, helps to explain why despite significant market expansion pay remains so low.[5. Victoria Bateman, ‘How to make the service economy really deliver’, Bloomberg View, 2016]

This, of course, has wider economic and social implications. Families struggling to make ends meet on low pay, suffering from in-work poverty, have associated health and welfare costs. And the low pay care sector not only acts as a general drag on productivity, but families employed within it are limited in their ability to spend and save.

Were it not for economists’ neglect of care, many of these problems could have been anticipated. And anticipating them would have been key to avoiding them. Only by bringing care centre stage will we be able to place the economy – and, more importantly, people’s wellbeing – on a stronger footing. It’s time to put care at the heart of economic thinking.

The question of how rich economies like Britain managed to develop such a state is currently gripping economic historians. Given that so many parts of the world have been unable to do so, one can understand why. Much talked about factors include favourable geography that fosters common experiences and a history of having to defend oneself – including, in Britain’s case, against the pesky Vikings. However, just as important – but regularly ignored – is the way in which individuals engaged with one another on a day-to-day basis. To understand how a little island off the edge of Europe managed to build a capable and democratic state, together with a whirl of commercial activity, we have to open up the black box that is the home.

Economic prosperity is built on women’s freedom

In the centuries before the Industrial Revolution, Britain was little more than a backwater on the international stage. Whilst in 1500 the Italians, Spanish and Portuguese were busy looking outwards, developing magnificent port cities with endless connections overseas but little connection to the mainland, Britain was doing the opposite: building a deep and well integrated internal market.[1. Victoria Bateman, Markets and growth in early modern Europe, 2012]

This early emergence of markets provided British women with opportunities that, whilst far from perfect, bought economic freedom, enabling them to escape from under the thumbs of their fathers. In medieval Britain, it was entirely normal for women to work, and marriage records from the sixteenth through the eighteenth centuries reveal that the average woman did not marry until she was around 26 years of age.[2. E.A. Wrigley and Roger Schofield, The Population History of England, 1981] That compares rather strikingly with other parts of Europe at the time, such as Italy, where women regularly married in their late teens (often to older men), and, of course, to modern day poor countries.

This relative freedom for women supported prosperity creation in a number of crucial ways. Later marriage helped to keep fertility and population growth in line with the economy’s ability to produce, creating a higher wage economy. This in turn encouraged mechanisation and the development of new technologies, culminating in the Industrial Revolution.[3. Robert C. Allen, The British Industrial Revolution in Global Perspective, 2009] Higher wages and lower numbers of offspring also better enabled families to save and to educate their children, providing the savings and skills that would be needed alongside a more capital-intensive and innovative economy.[4. See, for example, Tine De Moor and Jan Luiten Van Zanden, ‘Girl power’, Economic History Review, 2010]

By shifting family life away from a traditional to a nuclear family structure, women’s freedom also fostered a ‘capitalist spirit’. Brides would no longer be young and absorbed, helplessly, into the households of their parents-in-law. Instead, and with a husband of their own choosing, they set up their own household. That meant that to get married – to have a sexual life and to start a family – people had to be able to afford it. From a young age, people knew that their future depended upon their own actions, not on the match their parents would make for them. Women’s freedom, in other words, created an entrepreneurial and capitalist spirit – or what Weber termed the protestant work ethic.

Women’s freedom also drives democracy

From the day we are born, we are each ‘socialised’ by the norms and behaviour we observe within the family. Sociologist Emmanuel Todd argues that democracy and family life thereby feed on one another. Where family life is patriarchal, women become accustomed to not having a voice and young adults are encouraged to be deferential. When young people are encouraged to speak up (rather than shut up), and men and women are considered equal, it helps to build a population that demands democratic government. Indeed, where we find authoritarian and undemocratic political institutions in the world today, we also tend to find family institutions – in the form of norms and practices – that are ‘unfriendly’ to women. It should be of little surprise that attempts to ‘export’ democracy do not work well where family life remains undemocratic.

Greater equality within the home, therefore, helped foster demand for democracy, and democracy, in turn, fed greater equality within the home. As the divine rights of kings came to be questioned in the seventeenth century, so too did patriarchal power. Political scientist Valerie Bryson notes in her recent book that:

“Questions of authority in state and family were…intimately linked in the political theory of the time. Conservative defenders of absolute monarchical power argued that the authority of the king over his people was sanctioned by God and nature in exactly the same way as that of a father over his family; this meant that ‘patriarchy’ (the rule of the father) in the home was used as justification for a parallel power in the state. Opponents of such state power, who argued that authority was not divinely ordained but must rest on reason and consent, were therefore forced to re-examine arbitrary power within the family as well: logically, it seemed, patriarchy in state and home must stand or fall together.”[5. Valerie Bryson, Feminist Political Theory, 2016]

Democracy drives public services, and that supports growth

Not only are democracy and women’s freedom intimately tied, so is the emergence of state capabilities that we commonly take for granted today. ‘Votes for women’ and the expansion of the state into the provision of public goods, healthcare and education, all helped to support economic prosperity. It is in the parts of Europe, such as Britain, where women first began to earn their freedom that a welfare system also began to emerge. Instead of a burden to market activity, this deserves to be understood as something rather more positive.

In traditional societies, ‘welfare’ is provided within the family. Higher income earners help support those on lower incomes whilst women spend their time taking care of the young and elderly – even being pawns in the marriage market to enable their family to access more resources. Individual freedom and family needs can, as a result, conflict. Where markets enable people to ‘escape’ such practices – by giving them a way out – it leaves a welfare gap that needs to be filled. Enter the state.

The British welfare state dates back to Tudor times. Local parishes used land taxes to help support the elderly and ‘infirm’ and chased fathers who had abandoned their children. As economic opportunities for women outside of the home spread, this Old Poor Law system (though far from perfect) helped to fill the hole left by a retreating family-based welfare system – supporting the market by facilitating labour market participation and the movement of people for work or trade. Recent research by economic historians Bas Van Basel and Auke Rijpma has enabled us to compare welfare spending in different parts of Europe over the last 600 years. The results are striking: “from a European perspective the degree to which the English state succeeded in enforcing a nation-wide tax-based system of poor relief was exceptional”.[6. Bas Van Basel and Auke Rijpma, ‘How important were formalized charity and social spending before the rise of the welfare state? A long-run analysis of selected western European cases, 1400–1850‘, Economic History Review, 2016]

Looking to history it should be clear that the links between the state, the market and women’s freedom cannot be ignored. If we want to understand why so many parts of the world are still poor today – and why they have states that are undemocratic and inimical to growth – we need to start within the home. We need to bring women and family life into the Wealth of Nations.

Alongside the astronomical rise in living standards over the last two centuries, we have seen an unprecedented expansion of the state. Whilst the tax take of preindustrial states typically represented less than 5% of GDP, in the typical modern day OECD country taxes represent 20-40% of GDP.[1.  Noel Johnson and Mark Koyama, ‘States and economic growth: Capacity and constraints’, explorations in Economic History, 2016] And, perhaps ironically, it wasn’t a low-tax part of the world that spurred the process of modern economic growth. It was high-tax Britain that was home to the first industrial revolution in the late eighteenth and nineteenth centuries.

Not only do comparisons across the ravages of time suggest that states and prosperity go hand in hand, so do comparisons across countries today. Indeed, some of the poorest parts of the globe lack well established and capable governments. They also tend to be fragmented and experience significant internal conflict, including civil war. As economists Noel Johnson and Mark Koyama note:

“Today’s richest countries possess both sophisticated market economies and powerful, centralized, states. In contrast, the poorest people in the world tend to live in regions with dysfunctional markets and weak or failed states”.[2.  Ibid.]

The conclusion of a 2013 report for the National Bureau of Economic Research was as follows:

“[i]t is now widely recognized that the weakness or lack of ‘capacity’ of states in poor countries is a fundamental barrier to their development prospects. Most poor countries have states which are incapable or unwilling to provide basic public goods such as the enforcement of law, order, education and infrastructure”.[3.  Daron Acemoglu, Isaías Chaves, Philip Osafo-Kwaako and James Robinson,‘Indirect Rule and State Weakness in Africa: Sierra Leone in Comparative Perspective’, The National Bureau of Economic Research, May 2014]

Even in the US, where there is a tradition of arguing that the state is inimical to growth, there is increasing evidence of a historic link between the state and prosperity. That includes the work of Alex Marshall, author of The Surprising Design of Market Economies,[4.  Alex Marshall, ‘The Surprising Design of Market Economies’, University of Texas Press, January 2012] and that of Daren Acemoglu, Jacob Moscona and James Robinson, who, using postal stations as a proxy for state infrastructure in history, find a strong link with innovative activity, as measured by patents.[5.  Daron Acemoglu, Jacob Moscona, and James  Robinson, ‘State Capacity and American Technology: Evidence from the Nineteenth Century’, American Economic Review, 2016]

The positive correlation between the state and prosperity is hard to square with the popular idea that having a small government is necessary for building a rich economy. It’s difficult to deny the fact that big government can indeed be bad for the economy. Ask any New Yorker about William M. Tweed,[6.  ‘William M. Tweed’, Wikipedia, accessed 24 August 2017] one of the most corrupt politicians the city has ever known, and you’d soon understand why America is much more sceptical of big government than is Europe. And we all know the problems with communism and central planning.

So how do we explain the fact that many of today’s richest economies also have sizeable states?

State capability matters more than size

One possibility is that what matters is not so much the size of government but how capable it is. Economists define state capability as the capacity to collect taxes to fund public goods like defence and infrastructure, and to enforce law and order across its geographical territory. In other words, state capability requires both fiscal and legal capacity. However, state capability only seems to work in the best interests of society where it is combined with two other factors.

The first is markets. Markets are a necessary if not sufficient driver of economic prosperity,[7.  Victoria Bateman, ‘Lessons from history: how Europe did (and didn’t) grow rich’, University of Cambridge, 24 March 2013] and so the state needs to use its capacity to work with them rather than against them. Where taxes are used to build transport and digital infrastructure that support market activity, it is more likely to have a beneficial effect. Prosperity and the state will go hand-in-hand. However, when taxes are instead used to build palaces, suppress opponents or wage unnecessary wars, the outcome is likely to be altogether different.

In a recent study of twentieth-century China, Yi Lu, Mona Luan and Tuan-Hwee Sng[8.  Yi Lu, Mona Luan and Tuan-Hwee Sng, ‘The Effect of State Capacity Under Different Economic Systems’, available at SSRN, 6 February 2016] found that the number of communist party officials in a region had a negative effect on economic activity before the introduction of market reforms in 1978, but then had a positive correlation with numerous measures of economic performance thereafter, including growth in agricultural output, mortality rates, educational outcomes, and local infrastructure development. In their own words:

“Our findings suggest that state capacity could indeed accelerate development, but the effect is substantial and unambiguous only when the state seeks to complement the market instead of substituting it”.

The second factor is constraints on government. Where there are constraints on government that incentivise it to work in the best interests of the population, it is more likely that we will find a positive as opposed to negative relationship between the state and prosperity. Where that is not the case, it is unlikely that the state will work in the best interests of the population indefinitely, and at some point the result will be that it cannot continue to function, either as a result of revolution from within or being conquered by richer and more successful powers from abroad.

Democracy is key both to a capable state and a flourishing economy

The second way of resolving the paradoxical link between prosperity and the state is that rather than the state and prosperity being causally connected, both higher taxation and higher levels of prosperity could have a common underlying cause.

One such common cause could be democracy. Drawing on the historic Qing Empire, economists Debin Ma and Jared Rubin[9.  Debin Ma and Jared Rubin, ‘The Paradox of Power: Understanding Fiscal Capacity in Imperial China’, August 2016] argue that autocratic regimes can in fact find it difficult to build state capacity, including the capacity to tax. In contrast, in states with constitutional constraints, such as in England after the Glorious Revolution of 1688, the greater trust between the state, the public and administrative officials enabled fiscal capacity to be built. The development of this capacity enabled higher levels of taxes to be extracted by the central state on a consensual basis, so long as they were used in the best interests of taxpayers.

Since constraints on government also help support economic growth, such as by underpinning property rights, then it is inevitable that we would find a correlation between prosperity and the tax take of central government. The lesson is that the correlation between the two does not simply reflect the fact that higher taxes can sometimes be useful in supporting property creation, but that the background institutions that are creating incentives for economic growth also create the ability for the state to tax when needed. It is a matter of correlation not causation, driven by a factor in common to both taxation and prosperity.

 Economic prosperity increases demand for the state

The third and final way of resolving the paradox is to reverse causation: to consider the way in which greater prosperity might in turn fuel demand for government. That’s how the historian Avner Offer explains the significant state expansion of the twentieth century (see chart below).[10.  Avner Offer, ‘Why has the Public Sector Grown so Large in Market Societies? The Political Economy of Prudence in the UK, c. 1870-2000’, Oxford Economic and Social History Working Papers, March 2002]

Once we are rich enough to meet our everyday needs, Offer suggests that we start thinking about investing in our long term welfare, such as through healthcare, education and pensions. The only problem is myopia. In his own words, the tax system then provides “a commitment device which helps individuals overcome myopic preferences”.

That still, however, cannot explain the fact that Britain’s state was already sizeable in advance of the nation’s rise to fame. What is, however, worth noting is that England was precocious in developing internal markets centuries before many other European countries. Whilst internationally the nation was something of a backwater, internally it was highly commercial. And with that commercial activity came a nascent welfare state in the form of the Poor Laws.[11.  ‘English Poor Laws’, Wikipedia, accessed 24 August 2017] It was a welfare state that picked up the slack as society began to change: as it moved away from traditional family and feudal structures and towards the market. It helped to support the elderly and those incapable of working, thereby freeing younger generations – and women – to more fully engage in the market. Whilst it was by no means a perfect relationship (or a perfect system), the state and the market were already dancing – rather than conflicting – with one another from very early on.

How Britain was able to develop state capacity, together with democratic institutions and a respect for the market, is another question entirely. And it could not be more important given that so many parts of the world have been unable to do so. It’s a question I will therefore turn to next time.

But nearly forty years after the Thatcher experiment began in Britain and the Reagan revolution got underway in the US, capitalism is not only in trouble, many of its defenders are not displaying the sense of self-determination Thatcher championed. There’s too much blaming the Left for making seductive promises to voters – promises that they probably can’t honour. It’s all too easy to suggest that the problem with the new generation of young socialists is that they are misinformed; that the economic turmoil of the 1970s, and the reality of life behind the Iron Curtain, are now too distant in time.

Rather than blaming the Left for the return of socialism, it’s time for supporters of capitalism to engage in a bit of self-reflection: to take a leaf from Michael Jackson’s song book and look directly at the man in the mirror.

The hubris of capitalists will be capitalism’s downfall

Hubris kills and ever since the Berlin Wall fell – at the end of the decade in which Thatcher and Reagan reset global politics – capitalists have been dangerously hubristic. It has taken many forms. Notably the widespread sense just before the 2008 crash that boom and bust had been abolished. Only a year before the global economy began to tumble, The Economist magazine, the go-to publication of the rich and cosy Davos summiteers, reported with zeal that: “having grown at an annual rate of 3.2% per head since 2000, the world economy is over halfway towards notching up its best decade ever…Market capitalism, the engine that runs most of the world economy, seems to be doing its job well”. Not that well as it turned out.

However, the real problem for capitalism is not the hubris shown before 2008, but that shown since. Too many free market thinkers have continued seeing only the upsides of capitalism, blaming everything else on the state and the crash, in particular, on central banks and government subsidy of the housing market. Overlooking the greed of too many on Wall Street and in the City of London.

There’s too much defence of chief executive pay – even when it bears no relationship to company performance. There’s too little understanding among supposed friends of the system about the differences between free markets and big businesses. Adam Smith – who wrote powerfully about the underhand instincts of business – would be appalled at the way think tanks that purport to understand his teaching are so ready to defend large companies because they mistakenly see private commerce as nearly always good and attempts to limit corporates as nearly always bad.

This rosy view of business behaviour is most un-conservative, most un-Smithian and pretty socialistic. Accepting that capitalism has flaws is not a sign of weakness: it is what can make capitalists, unlike supporters of state-directed economies, look grounded in the real world rather than aspiring to reach an unattainable utopia via tractor production targets and other failed signposts of communist glory.

Realism is the first step to saving capitalism

First, there’s history. While markets have existed for centuries, technological and other forms of progress were, until recently, slow and sporadic. Prosperity requires something more than free enterprise. The effectiveness of markets depends on a series of factors that vary across time and across countries. That includes not only trust but also the extent to which society is free and open: where societies are tolerant of people who push boundaries and try new things, markets will be far more successful at delivering economic improvement. Culture matters as much as markets themselves.

Second, is creative destruction. We need to recognise that the very same forces that drive economic improvement within the capitalist economy also bring disruption. Unless people have the coping mechanisms needed to deal with this disruption, the forces that are pushing us forward will be resisted by the weight of those left behind. While this necessarily requires state intervention, it is intervention of a very particular kind: that empowers individuals, rather than interfering with our freedoms.

It points to an agenda of supporting individuals in ways that allow them to both keep up with change, such as through adult education, and to be creators of change, rather than mere responders to it. Had appropriate policies been in place to help those in deindustrialising England or rust belt America in the 1980s, as opposed to dumping whole communities on welfare, the huge protest votes of Brexit and Trump might never have happened. And with the robot revolution imminent – threatening even more disruption to the labour market – these issues are far from mere historical interest.

Third, is instability. Along the path of continued improvement, instability is inevitable. The Cambridge economist John Maynard Keynes was right to point out that boom and bust is an intrinsic part of capitalism. The ever unknowable future means there is little firm basis on which to “pin down” investment decisions, meaning investors have a tendency to copy each other, falling prey to fads that generate waves of optimism and pessimism that destabilise the economy.

Unfortunately, many capitalists refuse to accept that markets contributed to the events of 2008 and, imitating Milton Friedman’s analysis of the Great Depression, load all blame on to the state. We need to look to the underappreciated Austrian School of thought, one built around figures such as Hayek, who like Keynes but unlike Friedman, see instability as inevitable. But who also doubt whether the state is any more capable of judging the future than are private individuals, making the economy to some extent “untamable”.

Capitalists themselves need to reset the rules

While capitalism has been oversold, there is also an important sense in which it has been undersold. Too much terrain has been foolishly handed over to the Left when it comes to big modern-day issues that spark popular debate: equality and freedom. Ha-Joon Chang has famously argued that there is no such thing as a free market economy. That markets cannot properly function without the state establishing the “rules of the game”, and that, as such, the rules can be rewritten to deliver a more equitable outcome.

Alex Marshall similarly argues that modern markets are far from “natural”: that the markets that we find in rich economies are a result of law and order and state-funded infrastructure, and that the businesses that operate within these markets benefit from certain legally granted rights, such as limited liability. As I’ve argued elsewhere, this should be the rightful ground of Conservatives, not socialists. Rather than childishly rejecting anything that tampers with the idea of a perfectly competitive market – one that only exists in textbooks – Conservatives need to take ownership of sensible, albeit limited, forms of economic intervention.

It is notable how much 19th century Classical Liberals engaged with debates surrounding, for example, patent rights, bankruptcy law, limited liability and the role of Central Banks. They engaged not just with efficiency but with freedom and fairness. Rethinking the foundational elements of capitalism – the “rules of the game” – is precisely what’s needed today if we are to stem the tide of socialism by tackling “crony capitalism”.

People have lost faith in crony capitalism, not free enterprise 

While people have lost faith in capitalism, it is striking that support still exists for free markets, entrepreneurship and small government. The Reason-Rupe Millennial Poll of 18 to 29-year-old Americans found that whilst college-aged Americans had a less favourable view of capitalism than socialism, 72% supported the free market system. And, in the YouGov global poll of seven countries, conducted for the Legatum Institute, more people agreed than disagreed with the statement that “free enterprise is better at lifting people out of poverty than government”.

If it’s not the free market entrepreneurial element of capitalism that people dislike, what is it? It’s the very thing that can make capitalism akin to communism: the state and business being in each other’s pockets. It’s the lack of independence between the state and big business: government and business sucking up to one another, creating a layer of power that seems impenetrable to anything other than established elites, or, as in 2008, the big banks.

The ability of business to fund politicians has created a back door for established firms to unfairly influence policy. Occupational licensing – what Morris M. Kleiner calls “the fastest growing labor market institutions in the United States since World War II” – has effectively granted incumbent firms and practitioners monopoly rights, increasing the wages of skilled workers by around 15%, exacerbating income inequality.

Then there is the fact that while the state has been cozying up more and more to big business and skilled workers, they have cut their ties with trade unions. That leaves the public wondering why one and not the other is deserving of the ear of power. And, rightly or wrongly, the rescue of the banks made the state look like it was an instrument of the banks, rather than representative of the democratic will of the people. In the words of Joseph Stiglitz, “it was going to the assistance of the victimizer, and leaving the victims to take care of themselves”. Of course, people accept that within a free market free enterprise system, they face risks of bankruptcy and job loss. What they don’t expect is that such risks will be alleviated for those at the top.

Rebuilding support for capitalism requires a Reformation for the 21^st century

Five hundred years ago, the process began of cutting the ties between church and state. Now it’s time to cut the ties between the state and big business, though this time through less bloody means. As Stiglitz himself argues, “much of the inequality that we can see today is the result not of true market forces but of ‘ersatz capitalism’”. Capitalism needs to be redesigned for a new age, guided by what was once the priority of all Conservatives: not special interest groups, business or otherwise, but individual freedom. Doing so will show that it is not the market that is inimical to equality and freedom; it is socialism.

If capitalists want to save capitalism, they need to stop blaming socialists for overselling socialism. We need to look critically at the ways we both oversell and undersell what we would do best to call the free market, free enterprise system. Let’s get Michael Jackson playing.