The British economy is increasingly characterised by a form of ‘command capitalism’, in which the private sector is compelled by law to advance the political goals of the Government. Targets, regulation and taxation are used by the state to encourage firms to pursue non-economic goals such as net zero, ‘diversity’, egalitarianism and behavioural change. This capitalist command economy is neither socialist nor neoliberal: the Government does not seek to nationalise industries and run them itself, but instead subjects private companies to so much political interference, including price controls and quotas, that they become de facto agents of the state.
The capitalist command economy gives politicians power without responsibility. The Government sets out its ambitions and tasks the private sector with delivery, but a system that places non-economic goals above productivity, and forces firms to focus on issues unrelated to their business, is unlikely to deliver economic growth.
This new discussion paper, by Dr Christopher Snowdon, Head of Lifestyle Economics at the IEA, argues that that Britain now operates under a form of ‘command capitalism’, in which private firms remain nominally free but are compelled by regulation, targets and price controls to pursue the Government's political goals rather than economic growth.
Snowdon argues:
The private sector is increasingly directed by the state through targets, regulation and taxation to pursue non-economic goals such as net zero, diversity and behavioural change.
This system is neither socialist nor neoliberal, as the Government does not nationalise industries but instead subjects them to such heavy political interference, including price controls and quotas, that they become de facto agents of the state.
Under the Zero Emission Vehicle Mandate and the Clean Heat Market Mechanism, manufacturers face fines of up to £15,000 per petrol or diesel vehicle and £500 per heat pump sold below their government-set quotas.
Since 2010, the minimum wage has risen from 50% to 67% of the average wage, making the UK’s minimum wage the fourth-highest in the OECD, one of many examples of the state increasingly setting prices once left to the market.
