The Tories Should Ditch the Pro‐​Business Label and Focus on Being Pro‐​Market Instead

This article appeared on City A.M. on August 7, 2018.
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The great and good of the commentariat fear that Brexit will mean the Tories’ abandoning the terrain as the “pro‐​business” party.

But is that even a label worth fighting for and a good guide to how the party should approach policy?

Those who self‐​define as free‐​marketeers or libertarians have long argued that politicians should aim to be “pro‐​market” rather “pro‐​business”. This distinction might appear trivial or meaningless for most issues — but it’s an important one to make.

Being pro‐​market implies a starting point of considering consumer welfare, competition, and ease of exit and entry of firms (including those that do not even exist yet). It’s about getting the institutions right, and then allowing businesses to do their thing.

Being pro‐​business, on the other hand, inevitably means a tendency toward the status quo and government favouritism. Politicians often think of themselves as “pro‐​business” if they acquiescence to demands from existing firms for protectionism, subsidies from government, industrial strategies, or support for things such as childcare, even though these might harm the economy overall.

Some, such as prominent libertarian economics blogger Bryan Caplan, argue that abandoning the pro‐​business label cedes too much ground to capitalism’s critics. Sure, he says, some dumb government policies do tilt the playing field towards some businesses over others, but the overall impact of business on society is positive, and therefore worth defending.

Caplan points out that businesses play an extraordinary role in organising us to undertake activities to fulfil the wants and needs of others, much more efficiently than governments could ever do.

Given negative media portrayals of prominent business leaders and a tendency towards reporting only nefarious activities, it is necessary to make the counter case for business as a positive force.

Caplan may well be broadly right about the role of business in western societies. But being pro‐​something implies unconditional support for it.

If I were to take to Twitter to describe myself as pro‐​Trump, people would justifiably ask how I could support some of the President’s more economically illiterate policies, such as the imposition of highly damaging tariffs using the veneer of a “national security” threat.

In the same way, whether one likes it or not, self‐​defining as pro‐​business is seen as apologising for all sorts of bad business activity.

The important question, therefore, is why do businesses have the positive impact Caplan outlines?

The very reason businesses are a force for good in the way he describes is because they are embedded in a market economy. The frameworks set out under the law mean that, in most cases, the way businesses make money is by meeting our demands. If they cannot, they fail.

Describing oneself as pro‐​business then is to put the cart before the horse. Just as describing yourself as being pro‐​government would not carry the same connotations in a well‐​governed country such as Sweden as in China, it is wrong to think that good outcomes are delivered because of some inherent virtue of businesspeople as a class.

Businesses are staffed by flawed human beings, in the same way as governments and charities. Entrepreneurial and organisational talents deliver for us not because there is something inherently virtuous about all business, but because of competitive market policies.

Going back to the Conservatives, the problem is not that they are ignoring the voice of firms which want to remain within the EU’s Single Market and customs union. Rather, it is that, since 2010, the party has failed to have a meaningful economic policy beyond the desire to close the budget deficit.

The idea of broadening and deepening markets no longer appears an underpinning political aim for the Tories, and that means that they have little to say about how repatriated powers can be used to enhance prosperity after Brexit.

Instead, they often seem to be flailing around trying to correct or moderate capitalism, through industrial strategies or gender pay gap audits, even as the underlying growth rate remains modest.

Incumbent businesses would be affected by changes to trading and regulatory arrangements post‐​Brexit, and are therefore seeking for change to be minimised. Uncertainty and disruption certainly come with an economic cost.

But those fears would be allayed more reassuringly if there were any apparent desire on behalf of Theresa May’s government to use Brexit to radically broaden the scope of free trade, reform the tax system, liberalise land‐​use planning, and engage in a substantial effort to rethink damaging Brussels regulations.

The Tory party should not be worried about losing its pro‐​business label. But if it fails to be pro‐​market in its approach to policy, setting the conditions for economic openness and dynamism, then it will be rightly perceived as hurting business without any apparent upside.

Ryan Bourne

Ryan Bourne occupies the R Evan Scharf Chair in the Public Understanding of Economics at the Cato Institute in Washington DC.