Business must answer to 'Occupy Wall Street'

As the public squares of Western capitals fill with angry crowds – self-appointed representatives of the 'the 99%' – it is easy to poke fun. Railing against greed and inequality is akin to complaining about human nature. And far from being 21^st century sans-culottes, these are mostly avec-ipods: relatively well-off, educated, and accessorised with the clothes and gadgets of the corporate culture they damn.

But their inchoate chants give vent to an increasingly widespread disgust with the economic status quo. Across the OECD the global financial crisis has thrown 15 million people out of work. Massive bank bailouts have triggered public debt crises in the United States and Europe that presage penal inflation and tax hikes. In Britain, whose public debt has surged £1 trillion, GDP per person is now 13% lower than its pre-crisis trajectory.

Ordinary taxpayers and voters are bearing these colossal costs, while those that abetted the crisis – bank staff, economic bureaucrats and politicians – remain and even prosper. If this is not galling enough, the steady drip of obscene 'bonuses' and gargantuan pay cheques in the wider corporate world is Chinese water torture for disillusioned taxpayers and reluctant shareholders.

They struggle to articulate it. But the public is not angry about inequality per se, they are concerned by an economic system that appears to be allocating rewards arbitrarily and unfairly. They are gobsmacked that the system's shortcomings, starkly revealed, are being papered over, even exacerbated.

It is a public relations disaster for the intellectual 'Right' that vast swathes of voters worldwide are blaming capitalism for this offensive economic bog, and calling for greater government intervention. Even conservative writers like Charles Moore, former editor of The Spectator, are openly pondering whether the 'Left' was correct all along.

It is not surprising, though. The International Monetary Fund, self-anointed ringmaster of 'free markets', repeatedly endorsed our economic system before 2008. Countless books about globalisation over the past 30 years lauded how 'capitalism' was lifting millions out of poverty in the third world. Fukuyama's end of history pinpointed something, but it it wasn't the triumph of capitalism as many imagined.

That people blame capitalism will be an economic disaster too, laying the groundwork for yet further shifts away from the ideals of a free society.

Indeed, the 'occupying' protestors should be agitating for more capitalism and less government. Capitalism rewards talent and effort, and leaves the biggest rewards for those that risk their own money and time to bring goods or services to market that consumers can voluntarily buy – think Henry Ford or Lang Hancock; the late Steve Jobs or John Symonds in our own lifetime.

Capitalism is not about giant corporations being able to dump their losses on taxpayers. It is not about allowing senior employees to feast with impunity on the profits of capital supplied by others simply because they can. Nor is it about armies of bureaucrats, corporate welfare, implicit guarantees for banks, or welfare states so pervasive and meddling they have sucked the appetite for individual responsibility out of their citizens.

Government has systematically shielded the biggest companies and their staff from the bracing but vivifying winds of 'creative destruction', what Joseph Schumpeter considered the hallmark of genuine capitalism.

Through direct spending and subtle regulations western governments have permeated almost every facet of the economy. In banking, governments and economic bureaucrats have acted as Dr Frankenstein, unwittingly facilitating monstrous growth in banks' size, short-term profits and risk-taking with their implicit guarantees and feckless 'Basel' regulations.

Finally, despite patchy evidence at best, most economists agitate for Keynesian pump priming and artificially low interests rates to resuscitate economic growth. Yet their underlying models are often no less naive than the Leontief input-output tables that tried to animate the Soviet Union. Keynes' quip about economics being most useful as a form of employment for economists was far more apt.