E VER SINCE the financial crash of 2008-09, capitalism has not been working well. Ordinary people sense it and so do the elites, who have prospered through the West’s lost decade. The symptoms are lower growth, less dynamism and greater inequality. Damagingly, this has led to a widespread belief, particularly among young people, that the system is gamed and that things will not improve, even in the long run, Public anger has so far bounced back and forth among bankers, politicians, “experts”, remote bureaucrats, foreigners, China and the European Union, but sooner or later attention may turn to companies. After all, they employ lots of people, invest more than states or households and make all the profits. If you think that the economy is misfiring, it is perfectly logical to ask whether companies are misfiring, too.

After 30 years of globalisation, growing profits and rising executive pay, businesses have forgotten how far the pendulum can swing in democracies. History shows that those swings can be surprisingly large. America saw a backlash against big business in the 1910s and 1930s. Even in the 1970s President Richard Nixon accused supermarkets of profiteering and introduced price controls. In Europe state ownership became popular after the second world war, and France under President François Mitterrand nationalised banks and industrial firms in the 1980s. Today the world’s most dynamic large economy, China, likes to have a few giants in strategic industries that it can control. Across the emerging world, countries are as inclined to follow China as they are the West.

America and Europe have three main sources of ideas on how to make business work better for everyone: the left, the right, and incumbent firms with their self-interested agenda. Each is bad in its own way. Start with the left. In August Elizabeth Warren, a Democratic senator and a likely presidential candidate in 2020, launched the Accountable Capitalism Act, which would put workers on boards, create federal licences for firms that can be revoked for bad conduct, and require boards to balance the interests of shareholders, workers and local communities. In September Britain’s Labour Party floated plans to seize 10% of every firm and place it in “workers’ trusts” which would hand most of their income to the state, not to employees. It has since backtracked a little.

Clever activists on the left have already spotted how antitrust could be another lever. The trick would be to change the objective of competition policy from consumer welfare to a broader set of goals such as reducing inequality, increasing minority rights or saving small firms. In America, a bill known as the Merger Retrospective act, promoted by a group of Democratic politicians, proposes that the competition authorities review past deals for their impact on factory closures, inequality and R & D . Neither the Warren bill nor the Merger act will be passed, but both are indicators of the policies that have become mainstream among left-leaning parties. The intention is to make big business work better for ordinary people, but the result would be clumsy government intervention, a dilution of property rights and the spectre of heavily regulated firms under politicised supervision.

Boot camp needed, not cheerleading

The right, meanwhile, argues that business can work for all if only it is freed from its constraints. This is the present line of the Republican party, and of some right-leaning politicians in Europe. Some of the proposals being put forward, such as simplifying regulations and tax codes, make sense. But the approach as a whole will not work. The current boom is likely to prove temporary, and when it runs out of steam, investment levels and the formation of new businesses will probably fade again. Meanwhile the lobbying power of incumbent firms has increased further, with summits at the White House, perks buried in the new tax code and exemptions from the tariff lists. The government has pepped up USA Inc with some backslapping, but has not made it fitter.

The last of the terrible trio is the self-interested voice of big incumbent businesses. It holds that the executives in charge need more power: to help frame government policy, to retain more profits and to disregard shareholders. Often this is packaged as “long-termism”, corporate responsibility or patriotism. Yet the companies that support this agenda—JP Morgan, Berkshire Hathaway, BlackRock, McKinsey and Unilever—are clearly part of the establishment. They want a world in which incumbent firms are under less pressure to plough abnormally high profits back into the capital markets, giving them a licence to invest the money so they can grow ever larger, while enjoying tacit co-operation with the government to pursue industrial and social goals. It is a soft corporatism, dreamed up after a long boom, by powerful people who think the problem is that they are not powerful enough. What the West needs is dynamism and openness, not happier incumbents.

The alternative to this unappetising menu is a calibrated competition agenda. The problem industries amount to perhaps 20% of the American economy, and less in Europe. In the non-tech economy in America they are mostly not exposed to trade and involve lots of interaction with the state. Opening them up is an obvious move that transcends the political divide, and its attractions can be easily explained: lower prices, a wider choice of products, more potential employers and an economy in which upstarts have a chance. Competition has credentials as a remedy for the rich world’s problems. It can help spread wealth by making goods cheaper and reducing the monopsony power that firms can have over workers. It creates wealth by pushing firms to innovate.

A pro-market initiative would see governments set a broad agenda based on commonsense proposals to deal with problems that have emerged. It should be communicated to the public. Existing legal doctrine should be a tool of the policy, and a potential constraint on it, but not its master. A screening process could identify industries where this might cause difficulties.

Next the institutional architecture would be reformed. What is worrying from a consumer’s point of view must have a corresponding concept in competition law so that action can be taken in a way that is limited and predictable. That means updating laws for the 21st century. Markets can exist even when no money changes hands; concentration can include intangible assets; dominant firms can kill competitors by buying them. Europe’s competition bodies can improve the way they are run; the European Commission takes too long to investigate cases. In America the entire system may need to be redesigned. A far stricter attitude is needed towards conflicts of interest among officials and lawyers.

Finally, remedies need to be established that make a difference to consumers. Levying modest fines years after offences were committed makes little difference to the public. Wrapping companies in regulations and systems of supervision is counterproductive; indeed the ability of incumbents to take advantage of red tape is part of the problem. Instead the priority should be systematically to open up markets that appear to be closed or rigged.

That means removing legal or regulatory impediments for new firms, and untying knots of data and patents controlled by one firm so that they are available, on commercial terms, to everyone. It means replacing industry regulators who are too chummy with incumbents, and preventing powerful companies from taking out emerging rivals. It also means creating digital markets that empower individuals rather than tycoons.

All this may seem a tall order. Yet protectionism makes it even more crucial to prevent domestic markets from becoming cosy. After the next recession strikes, and perhaps after America’s presidential election in 2020, the West may look for new ways to make the economy work better for all. Competition should be top of the list. It could help save capitalism from itself.