BOOK REVIEW: In Defence Of Capitalism, By Rainer Zitelmann

Tom Burroughes Group Editor May 19, 2023


While unlikely to sway those already hostile to the free market economic system, this book puts a stack of facts and figures in front of those who, perhaps because of their public roles in driving debate, could use more ammunition.

We have all had that moment at a party or some other event where a person, upon finding out that you work in wealth management, claims that “capitalism leads to monopolies,” “capitalism causes wars” or “capitalism encourages people to buy stuff they don’t need.” There are also claims, which wealth managers are no doubt acutely aware of these days, that free markets cause inequality and destroy the environment. 

While to varying degrees all these claims are unjust, exaggerated or unbalanced without context, it is often difficult to find a point-by-point refutation and for it to be argued with reams of data, closely-reasoned argument, and a positive approach designed to sway the neutral observer. And yet, Germany-based academic and entrepreneur Dr Rainer Zitelmann (pictured) has done it in a 442-page book. It includes detailed surveys of how people in different countries, such as the UK, the US and France think about capitalism, inequality and “the rich.” While he does not hide his own convictions (see an example of his here), what’s refreshing is that he starts by trying to base his arguments on empirical facts. He writes in an engaging way, always conceiving of counter-arguments and what his responses would be. Some of the material he unearths from certain critics, such as the economist Paul Collier (arguing that firms should have the "public interest" at heart), are now almost the norm in this age of ESG, but they need to be unpacked.

This book is aimed, as I said, at the neutral observer and those who share some of the author’s views but don’t have all the facts at their command to support them. Dr Zitelmann doesn’t expect his book to sway hardened advocates of Big Government, confiscatory taxes or heavy regulation. (One or two might change their minds, of course. These things happen.)

The wealth management industry can of course try to insulate itself from such debates, hoping that its support for ESG investing, philanthropy and the wise transfer of wealth to the NextGen will keep away hostile attention. It is understandable that wealth managers don't want to get political. Clearly, controversies exist. (I argue about some of these issues here and here.) The sector cannot become narrowly ideological. Diversity of viewpoint is as essential as diversity in other respects. A person who is dubious about unfettered free enterprise and favors a large role for government might still make an excellent wealth manager. (The opposite is also true: fierce advocates of capitalism might be incompetent at the job.) But there’s clearly a problem if the free market economy, entrepreneurship and associated freedoms under the rule of law are in retreat. 

If the world moves in a more collectivist direction (both in its Left-wing and Right-wing versions), the wealth sector will suffer. We should remember that the industry we work in today expanded massively after the fall of the Berlin Wall in 1989, and the opening of Communist China in the late 1970s and, of course, the various reforms in the 70s and 80s (deregulation of sectors such as airlines and trucking in the US under the Carter administration, the privatizations of the Thatcher/Major era in the UK, and the rollback of very high taxes in Sweden, etc). None of those changes are immutable. There are often reports that younger adults are keener on socialism and high spending (although current high tax rates in certain countries might suggest this enthusiasm will not endure contact with reality.)

Dr Zitelmann has scored a palpable hit with this book. It’s definitely worth adding to the reading list.

In Defence of Capitalism: Debunking the myths, is published by Management Books 2000 Ltd, ISBN: 9781852527921

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